The Government has published draft legislation on a new Statutory Residence Test. The proposals are not yet law, but for those planning to enter or leave the UK, they merit careful attention.
Whether or not an individual is resident in the UK is crucial in calculating his or her liability to tax in this country. At present, individuals must rely on HMRC guidance and the body of case law in determining their residence status. There has been (and still is), however, a great deal of uncertainty about the current rules, as demonstrated in recent case law. As international mobility increases, this lack of certainty is widely acknowledged to be unsatisfactory.
In very simple terms, the new Statutory Residence Test will herald a move to rules still based on day-counting, but with connecting factors (‘sufficient ties’) enshrined in statute – and almost certainly new HMRC guidance. Ties to be considered are slightly different for persons arriving in the UK and for those leaving.
While it is anticipated that the Statutory Residence Test will provide a greater degree of certainty, the rules are also complex and they will need to be considered by anyone who is planning to move to or from the UK.
Consultation on the first draft of the legislation has now closed and further drafts are now expected to be published. The Statutory Residence Test is expected to come into effect from 6th April 2013.
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