The document, which has been cautiously welcomed by the professional bodies, follows years of uncertainty on the taxation position of individuals spending time in the UK. A series of high profile tax cases have undermined confidence in a system relying on case law which left individuals unsure of their position, whether coming to, or leaving the UK.
The consultation document could now provide certainty and clarity to taxpayers setting out conclusive residence and conclusive non residence tests and clear rules for cases which do not fall with these tests.
The proposals are extensive and detailed, but to give some examples, it is proposed that for individuals who have not previously been resident in the UK within the last three tax years, presence in the UK for less than 45 days each tax year will provide conclusive evidence of non UK residency. However this limit reduces to just 10 days where an individual has been resident in the UK in recent tax years and there are claims that this is far too restrictive.
Individuals working on a full time basis outside of the UK will still be subject to special rules. For example, returning to the UK for less than 90 days in a tax year, providing not more than 20 of these are work days (which can be as little as 3 hours a day), should preserve non UK residence status.
The Government proposes to retain the ‘183 day rule’ and where an individual is in the UK for more than 183 days in any tax year this will provide conclusive evidence of UK residence.
Where an individual does not fall within the conclusive tests, their residency status will be determined based on a number of factors that include the days spent in the UK, the residence of the individual’s spouse or civil partner, the location of their main home, and the amount of time the individual spends in other countries, amongst others.
These proposed rules are very complex and certain individuals will become UK resident under the proposed rules where previously they have been non UK resident. Therefore, any one who thinks they may be affected should take advice sooner rather than later.
These statutory rules will still be subject to any existing Double Taxation Agreements between the UK and a country in which an individual may be working/residing.
The consultation period will end in September and the intention is that the new rules will be effective from 6 April 2012.
If you would like more information about the impact of these changes on your personal circumstances, please call Janet Pilborough-Skinner on +44 (0)1908 257207.