The Government has published the responses to the consultation on the new Statutory Residence Test. The consultation is ongoing but they've already announced a number of amendments to how the Statutory Residence Test will operate in 2013.
In this article we look at the main changes.
Key changes to Statutory Residence
• The threshold for automatic non-residence for individuals who have been resident in one or more of the previous three tax years will be raised from 10 to 15 days.
This means that if you're a leaver and have been UK resident in one or more of the last 3 tax years, you will automatically be non resident (irrespective of the amount of UK ties you have) if your visits to the UK are less than 15 days in a tax year.
• Increasing the number of working days allowed in the UK from 20 to 25 working days.
• Increasing the number of hours that constitute a working day from 3 to 5 hours.
• The "family" connection factor will be amended so that only time spent with a child in the UK will be relevant.
• The definition of accommodation will be simplified and will apply where an individual has accommodation that is available to be used by them for a continuous period of at least 91 days in a tax year and the individual spends at least one night in that place during the tax year.
• Day counting: there will be a provision for exceptional circumstances which will allow days of presence to be disregarded where an individual spends a day in the UK for reasons beyond their control.
This will follow the existing provisions.
• Split year treatment: the conditions will be amended for individuals who leave the UK to live abroad. In particular, they will be able to spend up to 15 days in the UK in the part of the tax year after their departure and be non resident from the date of departure.
• Split year treatment: this will also be available for the spouses or partners (civil and common-law equivalent) of individuals who work full-time abroad.
• Transitional rules: there will be a transitional provision to allow the new statutory rules to be applied to previous tax years only where the individual needs to know what their residence status was in a year prior to the introduction of the test to determine their residence in future years.
Reforms to ordinary residence
• Ordinary residence will be abolished for tax purposes but Overseas Workday Relief (OWR) will be retained and placed on a statutory footing.
• OWR will be restricted to non-domiciles only.
• Individuals will be denied access to OWR if they have been UK resident in any of the previous three tax years.
• OWR will be denied to individuals who can be expected to be "based" in the UK beyond the "three-year point". This replaces the previous proposal that it would be denied to individuals whose only home is in the UK.
