The UK Residence Test
Blevins Franks´ articles often focus on Spain rules for tax residence. If you fulfil any of the residence criteria, you are liable for Spanish tax on your worldwide income.
However, it may not be that simple for British expatriates. If you spend time in the UK each year, and/or retain a few ties with the UK, you could potentially also be deemed to be tax resident there, a status that applies for income tax and capital gains tax.
UK nationals living abroad need to be aware of the UK’s Statutory Residence Test and understand how it applies to your circumstances. You need to be very careful to make sure you are not caught out and unexpectedly find you owe HM Revenue & Customs money.
You are automatically not resident in the UK if you meet any of the following conditions:
- You were not resident in the UK in any of the previous three UK tax years (a year here always refers to a UK tax year, April-April), and spend less than 46 days in the UK in the current year
- You were resident in one or more of the previous three years, but spend fewer than 16 days in the current year.
- You work overseas full time and spend no more than 30 days working in the UK (work day = three or more hours), and no more than 90 days in the UK in the relevant year.
You are automatically treated as resident in the UK if you meet any of the following conditions:
- You spend at least 183 days in the UK in the current tax year.
- Your only or main home is in the UK (i.e. a property available to be used by you for 91 or more days, if you actual use it for at least 30 days).
- You work full time in the UK for at least 365 days without a break from work of 31 days or more, subject to certain conditions.
If your residence position is not determined by the above two tests, then the “sufficient ties” test comes into play. The ties are:
- Family – spouse and/or minor children live in the UK
- Accessible accommodation – if available to you for 91 or more days, even if you only spend
one night in it
- Work – if you spend 40 or more days working in the UK
- 90 days – if you spent 90 days or more in the UK in either of the two previous tax years
- Country – if you spend more days in the UK than any other single country (only applies to ‘leavers’).
This test operates on a sliding scale, so the more ties you have with the UK, the less time you can spend onshore without becoming UK resident. Conversely, the fewer ties you have, the more days you can spend there before becoming UK resident. The number of days and ties varies depending on whether you are an “arriver” (not UK resident in any of the previous three years) or a “leaver” (resident in the UK in any of the previous three years).
There is a statutory basis for days spent in the UK due to “extraordinary circumstances”, up to a maximum of 60 days. However, this only applies where the individual has no choice and circumstances are unforeseen and beyond their control. Visiting an ill or dying relative is unlikely to be seen as a situation where there is no choice about being in the UK.
The test also outlines eight circumstances in which an individual may be able to claim split year treatment. This is important if you are leaving the UK or moving back.
The UK does have a double tax treaty with Spain, but it does not provide as much protection as you may think. Where you meet the domestic residency rules of both countries it can come down to nationality. It is possible to be tax resident in the UK even if you have been paying taxes in Spain.
For peace of mind about your tax residency status and the most effective tax planning for your situation, speak to a professional adviser who understands the intricacies of both UK and Spanish tax law and how the two interact.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
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