UK Residency Tests

Posted 23/08/2019

If a UK resident receives foreign income then it is likely that the income will be taxed in the foreign country before being paid to that individual, and again when the individual declares the income to HMRC. The UK has treaty agreements with some overseas countries, in which UK residents can claim tax relief if their foreign income is subjected to tax twice.

The resident can apply for a Certificate of Residence from HMRC which they can pass to the overseas authorities. For an individual to work out if they are classed as a UK resident for the tax year they should use the Statutory Residence Test. The Statutory Residence Test has four steps and tests to determine residency status. The first step is to consider is if the individual spent 183 days or more in the UK in the tax year. If they did, then they are classed as being a UK resident for that period. If the individual fails this step then they should move on to the automatic overseas test.

There are three parts to the automatic overseas test. Was the individual:
1. classed as a UK resident for 1 year or more of the last 3 tax years, and did they spend less than 16 days in the UK?
2. not classed as a UK resident in any of the last 3 tax years, and spend less than 46 days in the UK?
3. work overseas with no significant breaks, and spent less than 91 days in the UK? If they were in the UK, did they work for more than 3 hours a day for more than 31 days?
If the individual meets the criteria of any of the three questions then they will be classed as not UK resident for the tax year. If none are met, the automatic UK test is next to be considered.

The automatic UK test has only two parts to it. Did the individual:
1. spend 183 days or more in the UK?
2. have a home, or houses, where the individual lived in the UK during part of the tax year? If yes, was the property owned for 91 consecutive days, with 30 of the days falling in the tax year?
If the individual meets any of the two criteria they will be classed as a UK resident for the tax year. If none of the criteria match the individual has one more question to determine their status.

The final step of the statutory residence test is the sufficient ties test. This can be a family tie, a work tie, an accommodation tie or a 90-day tie to the UK. If the individual was a UK resident in at least one of the previous 3 tax years and spent more than 15 days in the UK in the tax year then the following conditions need to be met:
• 16 – 45 days in the UK in the tax year they will need to have 4 ties
• 46 – 90 days in the UK they will need 3 ties
• 91 – 120 days in the UK, and they will need 2 ties
• 120+ days in the UK will require 1 tie

Tags: self-assessment, income tax, personal tax, UK residency, residency tests