When is a resident not a resident?

Accountants may not be aware that the statutory residency test announced by George Osborne in his March Budget is currently causing some confusion.

A consultation on the residency test will be released on the 14th of June, but this is likely to be a disappointment to people who are on the borderline between residency and non-residency. The new legislation has two aims. Firstly, it hopes to provide certainty, and secondly, to maintain revenues.

HMRC lays down guidelines on the number of days someone needs to spend in the UK before they are classed as resident. The current ruling is 183 days or more or an average of 91 days per year over a 4 year period.

There are also other things to be taken into consideration such as family, business and property ties and reasons for visiting the UK.

The courts have backed a quality of time spent in the UK approach rather than the method of day counting. This basically means establishing that an individual is still tied to this country. However, this again can be difficult to enforce.

The long running battle between HMRC and Robert Gaines-Cooper is a good example of the problems surrounding the current rules on residency. In December 2006, commissions said that Gaines-Cooper was still resident because he owned various properties in the UK. He lost 2 appeals against this decision before winning the right to take his case to the Supreme Court.

The government is keen to stamp out all forms of tax avoidance and evasion but the debate over residency is likely to rumble on for some time.

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