Tax Chat - Here there and everywhere!
Jul 30, 2012
If you live in the UK but spend significant time abroad or live outside the UK and spend time here - when was the last time you checked your residency status and where you are liable to pay tax?
The UK currently has no clear test to determine tax residence resulting in much confusion.
The good news is that the end may be in sight. We now have draft tax rules written with the aim of making tax residence much clearer, these are expected to apply from 1 April 2013 giving a timely opportunity to ensure that your tax position is correct.
If you have any questions, or would like to discuss further contact Lesley Sutton on 01484 550 037 or at firstname.lastname@example.org
In the last Budget the Government announced its intention to introduce a statutory residence test for individuals with effect from April 2012. However, in December 2011 they announced that the statutory residence test would instead take effect in April 2013 to allow further time to finalise the detail.
Whilst the aims of the new legislation are to simplify the complex case law and to provide some much needed clarity it has been recognised that there will be some winners and some losers. It will be impossible for the Government to legislate for every scenario and so by providing a more clear cut test it is inevitable that some may fall out of the rules where previously they were in and vice versa.
Therefore, all individuals who work, live or have ties (including family and accommodation) in the UK but who spend time abroad, or those who live abroad but spend time in the UK should review their residency status in light of the new rules to ensure their position is being treated correctly for tax purposes.
The legislation will be constructed in parts. The first two parts will have more straight forward tests to assess if you are automatically resident or non-resident. If you should fail either of these tests because your position is more complicated you then fall into part three. Here your position is required to be reviewed against a variety of factors which vary depending on the number of days you spend in or out of the UK. New definitions and day bands will be implemented so please do not think, for example, by applying the 90 day threshold you will be covered.
Determining whether you are tax resident in the UK or not is fundamental to ensuring your self-assessment tax return position is managed correctly. By incorrectly considering yourself resident or mistakenly believing you are non-resident will mean you have either been paying tax unnecessarily or failing to pay tax when you should have been.
Whilst we recommend an annual review of your residency position we suggest a more thorough review is undertaken in light of the new legislation to gain comfort that you understand and document your residency position carefully.
If you have any questions or would like to discuss your residency status in more detail contact Lesley Sutton on 01484 550 037 or at email@example.com.