The UK residency test (Statutory Residence Test in the UK) is a set of rules that determine whether an individual is considered a resident in the UK for tax purposes. The test is based on several factors, including the amount of time spent in the UK, the individual’s home and work location, and their personal and financial ties to the UK.

The Statutory Residence Test in the UK (SRT) is the framework used by HM Revenue and Customs (HMRC) to determine an individual’s residency for tax purposes. This article aims to provide an in-depth understanding of the SRT, its components, and the factors considered when determining UK residency. By exploring the SRT in detail, individuals can gain clarity on their tax obligations and ensure compliance with UK tax laws.

Tax residency plays a significant role in determining an individual’s tax liabilities in the UK. UK residents are typically subject to tax on their worldwide income and capital gains, while non-residents are subject to tax only on their UK-sourced income and capital gains. It is therefore essential to establish residency status accurately to meet tax obligations and avoid any penalties or non-compliance issues

There are two main types of Statutory Residence Tests in the UK: the automatic tests and the sufficient ties test. The automatic tests are simpler to apply, and if you meet any of them, you will be considered resident in the UK for tax purposes. The sufficient ties test is more complex, and you will need to consider all of the factors involved to determine whether you meet it.

Automatic UK residency tests

There are four automatic UK residency tests:

• Days in the UK test: If you spend 183 or more days in the UK in a tax year, you will be considered resident in the UK for that year.
• Home in the UK test: If you have a home in the UK that you use for at least 30 days in a tax year, and you spend no more than 90 days in any other country, you will be considered a resident in the UK for that year.
• Working full-time in the UK test: If you work full-time in the UK for any period of 365 days, and at least one day of that period was in the tax year you’re checking, you will be considered resident in the UK for that year.
• Split year test: If you meet the days in the UK test for part of a tax year, and the home in the UK test or the working full-time in the UK test for another part of the tax year, you will be considered resident in the UK for the whole tax year.

Sufficient ties test

If you do not meet any of the automatic UK residency tests, you will need to use the sufficient ties test to determine your residency status. The sufficient ties test looks at a combination of the number of days you spend in the UK, the number of ties you have with the UK, and the strength of those ties.

The number of days you spend in the UK is the most important factor in the sufficient ties test. If you spend 16 or more days in the UK in a tax year, you will be considered to have a sufficient tie to the UK. However, if you spend fewer than 16 days in the UK, you may still be considered a resident if you have other strong ties to the country.

The other factors that are considered in the sufficient ties test include:

• Your home in the UK
• Your work in the UK
• Your family and personal ties to the UK
• Your financial ties to the UK

If you have a strong tie to the UK in one or more of these areas, you may be considered a resident in the UK even if you do not spend many days in the country.

Determining your UK residency status

If you are unsure whether you are considered a resident in the UK for tax purposes, you should seek professional advice. A tax advisor will be able to help you assess your circumstances and determine your residency status.

Calculating your UK tax liability

Once you have determined your UK residency status, you must calculate your UK tax liability. Your tax liability will depend on your residency status, income, and deductions.

If you are considered resident in the UK, you will be liable to pay UK tax on all of your worldwide income. However, if you are not considered resident in the UK, you will only be liable to pay UK tax on your UK-sourced income.

Impact of Double Taxation Agreements (DTAs): Individuals may find themselves in situations where they are considered residents of multiple countries due to varying residency rules. In such cases, Double Taxation Agreements (DTAs) between the UK and other countries can help mitigate double taxation. DTAs provide guidelines to determine residency, prevent double taxation, and allow individuals to claim relief

Conclusion

The UK residency test is a complex set of rules that can be difficult to understand. However, it is important to understand your residency status if you are a UK resident or if you are considering moving to the UK. If you are unsure about your residency status, you should seek professional advice.

Please contact Tribocon Outsourcing if you have any queries relating to residential status of company or individual.

Email – accountants@tribocon.com

Phone – +44 7418315939