Part 1.The Rules
Introduction
3.Paragraph 1 defines the purpose of this Part of the Schedule.
4.Sub-paragraph (3) of paragraph 1 states that the rules do not provide a residence test for parts of the UK but for the UK as a whole.
5.Sub-paragraph (4) of paragraph 1 specifies the different taxes covered by the statutory residence test:
income tax;
capital gains tax; and
inheritance tax and corporation tax (to the extent that the residence status of individuals is relevant to them).
Interpretation of enactments
6.Paragraph 2 specifies how the statutory residence test applies to the interpretation of other enactments.
7.Sub-paragraph (3) of paragraph 2 provides that the tax residence status determined by the statutory residence test applies for a full tax year, so that an individual is resident for every day in a tax year or not at all in that year. Sub-paragraph (4) of paragraph 2 explains that there are rules in Part 3 of this Schedule which relax the effect of that rule (without changing residence status) in certain circumstances.
8.Sub-paragraph (5) of paragraph 2 provides that the effect of this Schedule may be overridden by any express provision to the contrary in, or falling to be recognised and acknowledged in law by virtue of, any other legislation.
9.Examples of such provision include section 41 of the Constitutional Reform and Governance Act 2010 (which treats members of the House of Commons and House of Lords as resident in the UK for tax purposes) and Articles 12 and 13 of the Protocol on the Privileges and Immunities of the European Communities (which provides rules on the tax status of individuals who work for the European Union).
The basic rule
10.Paragraphs 3 and 4 provide that an individual (P) is UK resident if either the automatic residence test (see paragraph 5) or the sufficient ties test (see paragraph 17) is met for a tax year. If neither test is met for a tax year P is non-resident for that year.
The automatic residence test
11.Paragraph 5 sets out the automatic residence test. The automatic residence test is met if P meets at least one of the automatic UK tests (see paragraphs 6 to 10) and none of the automatic overseas tests (see paragraphs 11 to 16).
The automatic UK tests
12.Paragraph 7 specifies the first automatic UK test, which is met for a tax year if P spends 183 days or more in the UK in that year.
13.Paragraph 8 specifies the second automatic UK test.
14.Sub-paragraph (1) of paragraph 8 applies if P has a home in the UK during all or part of the tax year and P spends a “sufficient amount of time” in that home in that year. P will be UK resident for the tax year if, while P has that home, there is at least one period of 91 consecutive days (at least 30 of which fall within the tax year) throughout which condition A or condition B (or a combination of those conditions) is met.
15.Sub-paragraph (2) of paragraph 8 sets out condition A, which is that P has no home overseas.
16.Sub-paragraph (3) of paragraph 8 sets out condition B, which is that P has one or more homes overseas but each of those homes is a home at which P spends no more than a “permitted amount of time” in the tax year.
17.Sub-paragraph (4) of paragraph 8 specifies that P spends a “sufficient amount of time” in a UK home if P is present there at any point on at least 30 separate days in the tax year.
18.Sub-paragraph (5) of paragraph 8 specifies that P spends no more than a “permitted amount of time” in an overseas home is P is present there at any point on fewer than 30 days in the tax year.
19.Sub-paragraph (6) of paragraph 8 provides that the references to P being present in a home on at least, or fewer than, 30 days are to 30 separate days, whether consecutive or intermittent, and that for these purposes P is present at a home only if, at the time, it is a home of P’s.
20.Sub-paragraph (7) of paragraph 8 states that the test will be met so long as there is at least one period of 91 days where the conditions are satisfied, even if the period is in fact longer than 91 days.
21.Sub-paragraph (8) of paragraph 8 states that, if P has more than one home in the UK, the test must be applied to each of those homes individually.
22.Paragraph 9 specifies the third automatic UK test, usually known as “full time work in the UK”.
23.Sub-paragraph (1) of paragraph 9. specifies that the test is met if P works sufficient hours in the UK over a period of 365 days without a significant break from work (defined in paragraph 29), and all or part of the 365-day period falls within the tax year. More than 75 per cent of P’s working days in the 365-day period must be UK work days. A UK work day is a day in which P does more than 3 hours’ work in the UK. There must be at least one day falling within both the 365-day period and the tax year that is a UK work day.
24.Sub-paragraph (2) of paragraph 9 sets out the steps to follow for the purposes of assessing whether or not P has worked sufficient hours in the UK over a period of 365 days. P will have worked sufficient hours in the UK if P has worked on average 35 hours a week or more in the UK, as calculated by following the steps set out.
25.Sub-paragraph (3) of paragraph 9 specifies that the third automatic UK test does not apply if P has a relevant job on board a vehicle, aircraft or ship at any time in the tax year (as defined in paragraph 30) and makes, as part of the job, at least six cross-border trips in the tax year that either begin or end in the UK (or both begin and end in the UK).
26.Paragraph 10 specifies the fourth automatic UK test which applies to a year of death. The broad effect of this provision is that where P has been resident under one of the automatic UK residence tests in each of the previous three tax years and has a home in the UK, P stays resident in the year of death unless P went abroad in the previous year in circumstances such that split year treatment applied (provided none of the automatic overseas tests is met).
27.Sub-paragraph (1) of paragraph 10 sets out five conditions. P is treated as UK resident for a tax year if P dies during the year, P had a home in the UK when P died, if P had a home overseas then P did not spend a sufficient amount of time there in year X, for the three preceding tax years P had met the automatic residence test (see paragraph 5), and, even assuming P was not resident in the year of death, the preceding year would not be a split year as defined in Part 3 of this Schedule.
28.Sub-paragraphs (2) and (3) of paragraph 10 define what is meant by a “sufficient amount of time”. P must have been present in an overseas home for at least 30 days in the tax year, or have been there on every day from the beginning of the tax year (to meet the case where P died within 30 days of the start of the year).
29.Sub-paragraph (4) of paragraph 10 says that if P has more than one overseas home then the requirement of presence in the overseas home is met so long as it is met for each overseas home. So P need only satisfy the sufficient amount of time condition in respect of one such home in order to avoid being UK resident under this test.
The automatic overseas tests
30.Paragraphs 11 to 16 set out five automatic overseas tests. If P meets the conditions for any one of these, P will be non-resident for the tax year for which the test is applied.
31.Paragraph 12 specifies the first automatic overseas test, which is that P will be non-resident for a tax year if P spends fewer than 16 days in the UK in that year, does not die during the year, and was resident for one or more of the three tax years immediately preceding that year. The exclusion for cases of death ensures that P does not automatically become non-resident if P dies early in the tax year.
32.Paragraph 13 specifies the second automatic overseas test, which is that P will be non-resident for a tax year if P spends fewer than 46 days in the UK in that year and was resident for none of the three tax years immediately preceding that year.
33.Paragraph 14 specifies the third automatic overseas test, usually known as “full time work overseas”. P will be non-resident for a tax year if P works sufficient hours overseas for that year without a significant break from work (defined in paragraph 29), has fewer than 31 UK work days in that year and spends fewer than 91 days in the UK in that year (as defined in paragraph 22). A UK work day is a day on which P does more than 3 hours’ work in the UK.
34.Sub-paragraph (2) of paragraph 14 ensures that the special rule in paragraph 23(4) (under which certain days on which P is present in the UK other than at midnight count as days spent in the UK) does not apply for the purposes of the third automatic overseas test.
35.Sub-paragraph (3) of paragraph 14 sets out the steps to follow for the purposes of assessing whether or not P has worked sufficient hours overseas in the tax year. P will have worked sufficient hours overseas if P has worked on average 35 hours or more a week overseas, as calculated by following the steps set out.
36.Sub-paragraph (4) of paragraph 14 specifies that the third automatic overseas test does not apply if P has a relevant job on board a vehicle, aircraft or ship at any time in the year (as defined in paragraph 30) and makes, as part of the job, at least six cross-border trips in the tax year that either begin or end in the UK (or both begin and end in the UK).
37.Paragraph 15 specifies the fourth automatic overseas test. P is non-resident for a tax year if P dies during the year and spends fewer than 46 days in the UK in that year, and either P was non-resident for the two tax years immediately preceding the tax year in which P dies or was non-resident for the tax year immediately preceding that tax year and the tax year before that was a split year by virtue of Case 1, 2 or 3 of Part 3 of this Schedule (see paragraphs 44 to 46). The effect of this provision is to ensure that an individual who dies without establishing three full years of non-residence may in certain circumstances benefit from a 46-day rule equivalent to that in paragraph 13.
38.Paragraph 16 specifies the fifth automatic overseas test which ensures that P’s non-resident status is preserved in certain circumstances where P dies while working overseas. P is automatically non-resident if P dies during a tax year, having already been non-resident under the third automatic overseas test for the two preceding tax years (or for the year preceding the current tax year, with the year before that qualifying for Case 1 split year treatment) and if P meets the third automatic overseas test as modified.
39.Sub-paragraph (3) of paragraph 16 sets out the modifications to be applied to the third automatic overseas test in this situation. The third overseas test (in paragraph 14) is applied so that instead of assessing whether P has worked sufficient hours overseas for the whole tax year, the period assessed is that from the start of the tax year up to the day before the date of death. The permitted number of UK work days and days spent in the UK allowed under paragraph 14(1)(c) and (d) are not reduced.
The sufficient ties test
40.Paragraph 17 sets out the sufficient ties test. P will be resident under the sufficient ties test if P meets none of the automatic UK tests and none of the automatic overseas tests and if P has sufficient ties, as defined in Part 2 of this Schedule, for the tax year.
41.Sub-paragraph (3) of paragraph 17 specifies that the number of UK ties sufficient to make P UK resident for a tax year depends on whether P was UK resident for any of the three tax years immediately preceding that year and the number of days P spends in the UK in the year. The number of ties required is set out in paragraphs 18 and 19.
Sufficient UK ties
42.Paragraph 18 sets out how the number of days P spends in the UK in a tax year determines the number of UK ties sufficient to make P resident for that year if P was UK resident in one or more of the three tax years immediately preceding the year.
43.Paragraph 19 sets out how the number of days P spends in the UK in a tax year determines the number of UK ties sufficient to make P resident for that year if P was UK resident in none of the three tax years immediately preceding the year.
44.Paragraph 20 sets out how paragraphs 18 and 19 are modified in order to apply the sufficient ties test to an individual who dies during the year.
45.Sub-paragraph (1) of paragraph 20 specifies that if an individual dies then the lower limit of 15 days spent in the UK is removed when applying paragraph 18.
46.Sub-paragraphs (2) to (4) of paragraph 20 set out how the day counts in paragraphs 18 and 19 are time-apportioned if the individual dies before 1 March in the tax year to which the test is applied.
