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International tax planning:  Non-Domicile Status UK

3. Ordinary residence in the UK

3.1. How ordinary residence affects UK tax liability

When you are resident in the UK, whether or not you are ‘ordinarily resident’ in the UK is generally relevant only if you have foreign income during a tax year.

If you are resident but not ordinarily resident in the UK you may claim the remittance basis for your foreign income. But you will always pay Income Tax on your UK income.

When you are resident in the UK but not ordinarily resident you cannot use the remittance basis of taxation for your foreign gains unless you are not domiciled here.

The main exceptions to this general position relate to the application of the anti-avoidance legislation on transfers of assets abroad and the statutory provisions dealing with the attribution of income and gains to settlors or beneficiaries of trusts. These are complex matters which are not dealt with in this guidance. If they apply to you, you might wish to get professional advice.

Even if you are not resident in the UK, you may be ordinarily resident, and if so, you may be liable to Capital Gains Tax on the disposal of UK and/or foreign assets.

3.2. What does ordinary residence mean?

Ordinary residence is different from ‘residence’. The word ‘ordinary’ indicates that your residence in the UK is typical for you and not casual. It is important not to confuse ordinary residence with domicile (see part 4).

If you have always lived in the UK then you are ordinarily resident here.

When you come to the UK you do not have to intend to remain in the UK permanently or indefinitely in order to be ordinarily resident here. It is enough that your residence has all the following attributes.

  • Your presence here has a settled purpose. This might be for only a limited period, but has enough continuity to be properly described as settled. Business, employment and family can all provide a settled purpose, but this list is not exhaustive.
  • Your presence in the UK forms part of the regular and habitual mode of your life for the time being. This can include temporary absences from the UK. For example if you come to live in the UK for three years or more then you will have established a regular and habitual mode of life here from the start.
  • You have come to the UK voluntarily. The fact that you chose to come to the UK at the request of your employer rather than seek another job does not make your presence here involuntary.

The pattern of your presence, both in the UK and overseas, is an important factor when you are deciding if you are ordinarily resident in the UK. You will also need to take into account your reasons for being in, coming to, or leaving the UK and your lifestyle and habits. Parts 7 and 8 will help you with this, as they explain the considerations for those coming to and leaving the UK.

You can be ordinarily resident in the UK and, at the same time, be ordinarily resident in another country.

It is possible to be resident in the UK and be not ordinarily resident here. This means that although you are resident in the UK during a tax year, your residence does not have one or more of the factors that would make you ordinarily resident.

It is also possible (but unusual) to be not resident in the UK but remain ordinarily resident here. If you normally live in the UK you might become not resident solely for one tax year. As you would usually be resident in the UK and this is where you have your normal home, family ties and other social connections, you might still be ordinarily resident here.

3.3. Examples of ordinary residence

These examples are only illustrative. You will need to consider all the facts in your own case, including the purpose of any previous visits, any emerging patterns and your total and average day counts. It is not possible to cover every eventuality in this guidance and you may like to contact us or take professional advice if your circumstances are not obviously covered in this part of the guidance. If any of the facts in the examples are changed then the status of the individuals might change.