The Statutory Residence Test was introduced by HMRC on April 6th 2013 to determine the tax residence status of individuals with connections to the UK.
The Statutory Residence Test, while complex, is vital when it comes to understanding your UK tax residence status as being defined as a tax residence of the UK could mean that your worldwide income is subject to UK tax, and failure to correctly declare and pay tax on any income could lead to penalties and fines.
Due to the complexity of the Statutory Residence Test it is always advisable to seek professional advice from a tax expert with experience in correctly determining your residence status.
The information provided below is for guidance only and you should always speak to a tax expert to ensure that you fully understand the Statutory Residence Test and your UK tax residence status.
Statutory Residence Test: Key components
There are four essential components to the Statutory Residence Test:
- How much time you have spent in the UK in a tax year
- Automatic Overseas Test
- Automatic UK Tests
- Sufficient Ties Test
In the simplest terms, you will be considered a non-UK resident for tax purposes if you meet the automatic overseas test and you do not meet the automatic UK test or Sufficient Ties Test.
You will, however, be considered a UK resident if you do not meet the Automatic Overseas Test and you meet one of the Automatic UK Tests or the Sufficient Ties Test.
Calculating the number of days spent in the UK in a tax year
Under the simplest terms, if you spent more than 183 days in the UK in a given tax year, you would normally be considered a UK resident. However, calculating the number of days spent in the UK is not straight forward.
The HMRC set out a number of criteria for determining whether you spent a day in the UK. Normally you are considered to have spent a day in the UK if you are here at midnight on any given day.
However, this is also subject to three other factors: The deeming rule; transit days; time spent in the UK due to exceptional circumstances.
Firstly, the deeming rule which takes into consideration if you have:
- been UK resident in one or more previous tax years
- three UK ties for the tax year or
- been present in the UK for 30+ days without being present at the end of each day.
The deeming rule will automatically change the number of days you spent in the UK, even if you were not present at the end of the day. To get a correct calculation of the number of days you have spent in the UK, and whether the deeming rule applies to you, you should seek expert advice.
Secondly, transit days. Transit days typically are not considered full days under the Statutory Residence Test. A transit day is a day where you entered the UK from another country en route to another country.
To be considered a transit day you must not have conducted any other business during your time in the UK and you should leave the day after you arrive. Any other business could include conducting a meeting, meeting up with friends. However simply having breakfast or dinner would be considered as part of your transit.
You should seek clarification about your activates during your time in the UK as they could have an impact on your total days spent in the UK.
Finally, if you are in the UK due to exceptional circumstances, such as a bereavement, you may be granted special conditions with regards to the total number of days you have spent in the UK.
The number of days spent in the UK may also be affected by the amount of time and type of work you have conducted in the UK during your stay. Factors such as your location, type of work and whether the work is voluntary.
As with all other elements you should always seek advice if you are unsure about how you work may affect the number of days spent in the UK.
The Automatic Overseas Test
You would normally be considered a non-UK resident if you meet any one of the following elements of the Automatic Overseas Test:
- You were considered as a UK resident in one or more of the previous three tax years, but you spend fewer than 16 days in the UK in the current tax year
- You spend fewer than 46 days in the UK in the tax year AND you were non-UK resident in the preceding three tax years
- You work full time outside the UK and spend fewer than 91 days in the UK and you work fewer than 31 days in the UK for three hours or less in any given day.
In terms of calculating the amount of time working in/out of the UK, you should always seek advice. There are a number of intricate calculations and considerations which will be taken into consideration which will affect the amount of time you have officially spent in the UK.
The Automatic Residence Test
If the Automatic Overseas Test is inconclusive, or you fail each of the components, the next step is to consider the Automatic Residence Test. If you meet any of these requirements you will be considered a UK Resident. Once again, there are intricate calculations involved, so you should always seek advice before making any decisions about your residence status.
Firstly, if you spend more than 183 days in the UK in the tax year.
Secondly, if you have a home in the UK and you spend a period of 91 consecutive days there, including 30 inside the tax year. You will also be considered a UK resident if you have no home overseas or you spend no more than the permitted amount of time there.
Finally, if you work in the UK for 365 days with no significant break. However, there are a number of calculations and requirements to fulfil, so please seek advice if you are concerned
The Sufficient Ties Test
If, after reviewing the previous tests, you are still unsure about your residence status, you need to consider the sufficient ties test.
The Sufficient Ties Test essentially looks at whether you have ties which would deem you to be a resident in the UK. Ties would include:
- Family members in the UK (for example a spouse or children)
- Accommodation, that is a place to stay which is available to you for a continuous period of 91 days (thus excluding hotels)
- 40 working days of 3+ hours per day or more in the UK
- More than 90 days spent in the UK in at least one of the previous two tax years
- You have spent more days in the UK than in any other country during the tax year
Understanding how many ties which are required to determine your residence status will depend on the number of days you spent in the UK during the tax year.
The following table simplifies this, however you should seek advice for an accurate assessment
|Days spent in the UK in the tax year under consideration||UK ties needed to be considered a UK resident|
|16-45||At least four|
|46-90||At least three|
|91-120||At least two|
|Over 120||At least one|
The statutory residence test and split year treatment
If you have left the UK or have arrived in the UK during the tax year, providing you meet specific criteria relating to your particular situation, you may be able to apply split year treatment to minimise your tax liability. For more information about split year treatment, including examples, please read our guide to split year treatment.
Request a free introduction to a Statutory Residence Test specialist
Correctly determining your tax residence status is essential and will help ensure you pay the correct amount of tax in the UK.
If you are unsure of your UK tax residence status or would like some assistance understanding the Statutory Residence Test and how it applies to you, request a free introduction to one of our tax specialists.
As part of our introduction service, you will also receive a free initial consultation which lasts for around 15 minutes. During the consultation you can ask general questions about your tax residence status and the consultant will be able to provide guidance around your situation. If you need further assistance, the consultant will be happy to outline any additional services that you may like to use and indicate potential fees and charges for any services that may be required.