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International tax planning:  Non-Domiciled Resident Status UK

2. Residence in the UK

It is important that you understand what we mean by ‘resident in the UK’ because this will determine what UK tax you have to pay. There is no statutory definition of ‘residence’. Instead, it takes its normal, everyday meaning.

It is possible to be resident in the UK under our tax rules and at the same time be resident in another country under that country’s tax rules. This is sometimes referred to as ‘dual residence’.

If you are resident in the UK and another country, you will need to look at the guidance in part 9 which tells you about Double Taxation Agreements (DTAs). If a DTA exists between the UK and the other country there may be provisions in the agreement to determine where you will pay tax. If you are also resident in another country, you should note that UK and foreign tax years might not be the same.

2.1. UK residence – tax liability

When you are resident in the UK you are normally taxed on the ‘arising basis of taxation’, meaning you will pay UK tax on:

  • your income which arises in the UK
  • your income which arises outside the UK
  • gains which accrue on the disposal of your assets anywhere in the world.

But, if you are resident in the UK and you are:

  • not domiciled in the UK and/or
  • not ordinarily resident in the UK there are special rules which might apply to your foreign income and gains. These allow you to pay UK tax only on the amount of your foreign income and gains that you, or another relevant person, brings (or ‘remits’) to the UK. Even if these special rules do apply to you, you will still have to pay UK tax on any of your income and gains which arise/accrue in the UK. This method of dealing with your foreign income and/or gains is called ‘the remittance basis’.

2.2. UK residence

There are many different factors which will determine whether you are resident in the UK. With one exception (explained in the next paragraph), it is not simply a question of the number of days you are physically present in the UK during a tax year, although this is an important consideration.

The only occasion when the number of days that you are physically present in the UK will determine your residence status is when you are here for 183 days or more during a tax year. If you are here for 183 days or more in a tax year, you are resident in the UK. There are no exceptions to this.

You can also be resident in the UK if you are present here for fewer than 183 days in a tax year. This will depend on how often and how long you are here, the purpose and pattern of your presence and your connections to the UK. These might include the location of your family, your property, your work life and your social connections.

The following are examples, but they are not a complete list. These and any other relevant factors must all be considered together to give a complete picture.

  • Family ties include having a spouse, civil partner, children or other family members you are close to, in the UK.
  • Social ties include membership of clubs and societies and events that you regularly attend or host. It also includes any regular recreational engagement, such as returning each year for an annual sporting season.
  • Business ties include owning or being a director of a business based in the UK, or having employment, including self-employment, in the UK. Regular employment duties in the UK are a tie and you need to consider the extent, frequency and nature of those duties. It does not matter if the duties themselves are not taxed, for example because of a DTA.
  • Property ties include a house or apartment that you own or lease, or property held primarily for investment but that also provides you with accommodation when you are in the UK. A house or apartment provided for your use for the duration of your time in the UK as part of an employment package is ‘available accommodation’ and is a tie to the UK.
  • If you think that you may just be visiting the UK then part 7 will help you to consider the pattern of your visits, but you must also consider the purpose of those visits. For instance, a short term one-off employment assignment to complete a project for a foreign employer might not in itself make you resident. But if you repeatedly come to the UK for regular business meetings then your visits have a non-temporary purpose. You need to look at the frequency of those visits alongside your other ties to the UK.

If the nature and degree of your ties to the UK show that it is usual for you to live in the UK, you are resident in the UK. It does not matter whether you live here for employment, leisure, or just because you like being in the UK.

If you have previously been resident in the UK then to become not resident you must leave the UK, either by making a definite break or by taking up full-time work abroad – see part 8.

2.2.1. Days of presence

When you count the number of days that you have been present in the UK during a tax year you must include all of the days in which you have been in the UK at the end of the day (that is, midnight). It is the number of days counted in this way that is important, not the number of visits you make to the UK. This applies from 6 April 2008.

This is the general practice, but it will not necessarily be appropriate in all cases. If you spend very significant amounts of the year travelling internationally, you should keep a record both of the days you were present in the UK and of those days where you are here at midnight. Both will be factors when looking at the pattern and purpose of your visits.

For tax years before 6 April 2008, you would not normally count any days on which you arrived in or departed from the UK.

2.3. Passengers travelling through the UK

Under the rules which apply from 6 April 2008, if you are a passenger travelling between two foreign countries via the UK, and you arrive in the UK on one day and leave for your next foreign destination on the following day, you will not have to count the day you arrived in the UK. This applies even though you were still in the UK at midnight at the end of that day. Neither will you count the day you leave the UK. But this does not apply if you engage in any activities while in the UK that are not substantially related to completing travel to a foreign destination. So if you attend a business meeting, visit a property you own, arrange to meet people socially or attend social activities, you must count that day as a day of presence if you are in the UK at the end of the day.

2.4. Residence – Years of arrival in and departure from the UK

Strictly, you are taxed as a UK resident for the whole of a tax year when you are resident here for any part of it. But, if you leave or come to the UK part-way through a tax year, the year may, by concession, be split (Extra-Statutory Concession A11). This means that the UK Income Tax you should pay because you are resident here is calculated on the basis of the period you are living here rather than the whole of that tax year. This has the effect of splitting the tax year into resident and not resident periods for the purposes of calculating the tax due.

This split-year treatment will apply to individuals who:

  • come to the UK to take up permanent residence or to stay for at least two years, or
  • leave the UK to become permanently resident abroad, or
  • leave the UK for full-time service under a contract of employment for at least a complete UK tax year and any interim visits to the UK in the period do not amount to 183 days or more in any tax year or an average of 91 days or more in a tax year.

There is a further Extra-Statutory Concession (A78) which also allows splityear treatment if you are accompanying your spouse or civil partner when they leave the UK to work full-time abroad, or in the year of return to the UK.

Although the rules for capital gains are significantly different from those for income, there is a split-year concession which relates to the chargeable gains of people who come to, or leave, the UK during a tax year (Extra-Statutory Concession D2).