• income arising in the UK, whether or not they are resident in the UK;
• income arising outside the UK if they are treated as resident in the UK; and
• any gains or profits made when assets are disposed of anywhere in the world, if the individual is resident or ordinarily resident in the UK.
Special rules apply in certain circumstances, but generally the amount of income tax and capital gains tax arising will depend on whether a taxpayer is resident and/or ordinarily resident in the UK.
There is currently no statutory residence test, and as a result, it is often an area of contention between HMRC and taxpayers whether the taxpayer is UK resident or not. The Government is currently consulting on this and it is expected that a new statutory residence test will be legislated for in Finance Act 2013 and will take effect from 6 April 2013.
Under current legislation, if you’re physically present in the UK for 183 days or more in the tax year, you will be treated as UK resident for tax purposes– there is no exception to this rule. If you are still in the UK on midnight at the end of a particular day, this is counted as a day of residence for UK tax purposes.
Shorter-term visitors may also be treated as resident for a tax year in which regular visits to the UK are made. If you’re in the UK for fewer than 183 days in a tax year, but after four tax years your visits during that time average 91 days or more each tax year, you’re counted as resident. In this situation HMRC treat you as resident in the UK from the start of the fifth year. However, if it’s clear when you first come to the UK (for example, because you have set work commitments) that you intend making such visits and you do actually make the visits, HMRC treat you as resident from 6 April of the first year you come. Any days you spend in the UK for exceptional circumstances beyond your control (for example, because you or a member of your immediate family were ill) generally don’t count.
If you’re resident in the UK year after year, you’re treated as being ‘ordinarily resident’ here. Again, at Budget 2011, the Government announced its intention to reform ordinary residence with effect from April 2012. However, on 6 December 2011, it was announced that the introduction of any reforms would be deferred until April 2013.
Under the current rules, as a shorter-term visitor, you can also be treated as ordinarily resident if you come to the UK regularly and your visits average 91 days or more a tax year. Any days spent in the UK for exceptional circumstances beyond your control, for example due to illness, aren’t normally counted. The date from which HMRC treat you as ordinarily resident depends on your intentions, and whether you actually carry them out. You will be treated as ordinarily resident:
• from 6 April of the tax year of your first arrival, if it is clear when you first come here that you intend visiting the UK regularly for at least four tax years.
• from 6 April of the fifth tax year after you have visited the UK over four years, if you originally came with no definite plans about the number of years you intend to visit.
• from 6 April of the tax year in which you decide you’ll be visiting the UK regularly, if you make that decision before the start of the fifth tax year.
You can be resident or ordinarily resident in both the UK and in another country (or countries) at the same time. Being resident or ordinarily resident in another country doesn’t mean that you can’t also be resident or ordinarily resident in the UK.
Practical Tip :
Strictly, you’re taxed as a UK resident for the whole of a tax year if you’re resident here for any part of it. But if you leave or come to the UK part way through a tax year, HMRC may agree to split the tax year for tax purposes.