On 6th April 2013, the Statutory Residence Test was changed. In essence, maintaining and claiming non-UK residency for tax purposes has become more difficult.
Those who work across international borders, such as on a ship or a plane should have been contacted by HMRC regarding their residence status in response to these changes. These workers can no longer be deemed a non-UK resident through use of the full time contract abroad condition.
Non Resident Tax before April 6th 2013
Prior to the changes in April 2013, if you spent fewer than 91 days in the UK and had few work/family/property ties in the UK it was likely that you were deemed a non-UK resident for tax purposes.
How will the changes affect me?
Since 6th April 2013 though, you will be deemed a UK resident for tax purposes if:
– you are in the UK for 183 days or more or you have no other home outside of the UK or you work in the UK for 276 days or more. (These are the conditions of the Automatic Residence Test)
– You meet the conditions within the Sufficient Ties Test.
What is the Sufficient Ties Test?
There are 5 domains within the Sufficient Ties Test. In summary, these are as follows:
- Family: within the UK there is a child of yours who is under the age of 16, who you see for over 60 days per year, or a spouse or civil partner, or a partner with whom you live with permanently.
- Accommodation: you have somewhere to live in the UK and you spend one or more nights in this accommodation per year or you spend 16 nights or more in the tax year with a close relative.
- Work: you work in the UK for 40 days or more during the tax year and each of these working days are for 3 hours or more.
- Number of days spent in the UK: you have spent 90 days or more in the UK in either or both of the past two tax years.
- Number of days spent in other countries: you spend the same amount of days, or more in the UK than in another country.
Within the Sufficient Ties Test, essentially, the fewer days you have spent in the UK, the more ties to the UK are necessary in order to be considered a UK resident for tax purposes. Furthermore, the longer you have been resident in the UK, the fewer ties are necessary, and vice versa.
If you think you have been taxed unnecessarily by HMRC due to your residency status, if you are an international transport worker and have received a letter from HMRC, or you are not sure of you residency status, you can contact HMRC for assistance.
UK Non Resident Tax – Remittance Basis
If you are eligible to the ‘Remittance Basis’, you only have to pay UK tax on any income or commodities that are earned abroad, if they are sent to the UK.
The ‘Arising Basis’, on the other hand is when you have to pay UK tax at the point of earning.
Before 6 April 2013:
– if you were a UK resident AND domiciled, you could not use the Remittance Basis for tax. Therefore all earnings and commodities gained, whether in the UK or not, were taxed according to the Arising Basis
– if you were a UK resident but NOT domiciled, or if you were not ordinarily resident in the UK, you could use the Remittance Basis for tax on earnings made outside of the UK. However, all UK earnings must be taxes according to the Arising Basis.
However, since the April 2013, the Statutory Residence Test has removed the notion of ‘ordinary residence’. This effects tax on those goods or income sent to the UK, and on those working overseas. The notion of domicile however, remains.
