TXF6 UK
Syllabus B. Income Tax And Nic Liabilities B1. The scope of income tax

B1a. The residence of an individual

Syllabus B1a)

Explain how the residence of an individual is determined.

How is the residence of an individual determined?

3 Stages to determine UK residency

If a person is UK resident in a particular tax year they must pay income tax on their UK and overseas income

If a person is not UK resident, then they do not pay UK income tax on their overseas income, they only pay on their UK income

The determination of whether a person is UK resident is based on 3 major stages in the following order:

  1. Is the person automatically resident overseas? (2 tests)

  2. Is the person automatically UK resident? (3 tests)

  3. None above satisfied, use table.

STAGE 1: Is the person automatically resident overseas?

If one of the two tests below are satisfied, then the person is automatically resident overseas and will only pay UK income tax on his UK income.

Test 1 – Short stay in UK Test 2 – Employed abroad
In UK for less than 16 days in the tax year. Employed overseas and visits UK for less than 91 days during the tax year.
OR
In UK for less than 46 days in tax year and never previously UK resident.

Illustration

Shayna is in the UK for 40 days during the tax year. She was not previously UK resident. 

Will she be considered to be UK resident for this tax year?

  • Solution

    No - Shayna satisfies Test 1 – Short stay in the UK. This is because she is in the UK for less than 46 days and has not been UK resident previously.

STAGE 2: Is the person automatically UK resident?

If any of the tests below are satisfied, then the individual is automatically UK resident and will pay UK income tax on his worldwide earnings. 

If none of the above tests are met, then there are detailed rules to follow to determine residency.

Test 1 -  Long stay  Test 2 –  Nowhere else to go Test 3 -  Employed in the UK
Spends at least 183 days in the UK in the tax year Only home is in the UK Employed full time in the UK. 

Illustration

Hemant is in the UK for 60 days during the tax year, his only house is in the UK. 

Will he be considered to be UK resident for this tax year?

  • Solution

    Yes - Hemant will be considered to be UK resident for this tax year because he satisfies Test 2 – nowhere else to go.

The foundation of the detailed rules is based on:

  • Was the individual previously UK resident?

  • How many days did they spend in the UK in this tax year?

  • Do they have the amount of UK ties necessary to be considered UK resident in this tax year?

Days in the UK Previously UK resident Not previously UK resident
Less than 16 days Automatically not UK resident Automatically not UK resident
16-45 Resident if 4 UK ties Automatically not UK resident
46-90 Resident if 3 UK ties Resident if 4 UK ties
91-120 Resident if 2 UK ties Resident if 3 UK ties
121-182 Resident if 1 UK ties Resident if 2 UK ties
183 days Automatically UK resident Automatically UK resident

Ties

  1. Close family in the UK (Wife, child).

  2. House in UK which is used during the tax year. (at least 1 night during the tax year)

  3. In the UK for more time than any other country.

  4. In UK for more than 90 days in either of the previous 2 tax years.

  5. Doing substantive work in the UK. (40 days or more)

Illustration

Candice has always been UK resident. 

During this tax year she purchased a villa in India where she lived for most of the tax year. 

She has a house in the UK where her husband and children stay. 

During this tax year she spent 100 days in the UK.

Will Candice be considered to be UK resident in this tax year?

Solution:

Yes - Candice will be considered to be UK resident. 

This is because:

  1. She spent 100 days in the UK.

  2. She was previously UK resident.

  3. She has 2 ties in the UK, close family and a house.