Few aspects of the UK tax system have caused such problems in recent years as the issue of taxpayer residence. Given that this is an aspect that is utterly fundamental to the UK tax treatment of an individual, it is remarkable that there has been so little tax legislation on the subject for such an extended period of time. For many years the principal guidance on the question of residence came from two sources, namely the courts (which, given the haphazard nature of the cases which are litigated, could hardly provide comprehensive guidance) and HMRC’s booklet IR20, which offered extensive guidance on HMRC’s views of residence, but had no statutory authority.

This system held together remarkably well for a considerable period, but began to fall apart under the pressure of the changing transport possibilities in an increasingly mobile world. The opening of the Channel Tunnel and the widespread availability of cheap air fares, not to mention relaxed border controls between EU nations, meant that it became possible to be an international commuter even to an island nation such as ours. It is no coincidence that many of the recent tax cases on residence have featured airline pilots, who have particular scope to live their lives on a more international basis than could have been envisaged when the legislation and HMRC guidance was drafted.

As a result of the problems that this increased international mobility generated, HMRC gradually changed its stance on various of the views given in IR20, to the extent that it became a dead letter before it was formally withdrawn. This of course generated a large amount of uncertainty, which was a particular problem given the large amounts of tax that could be at stake depending on the residence of a particular taxpayer for a particular tax year.

This fairly quickly generated a consensus that more extensive legislation on residence was required, including a statutory residence test. What we now have on offer for consultation, in the form of something close to final draft legislation, has been ten years in the making. So is it worth the wait?

The stated aim of the statutory residence test is that it should be ‘transparent, objective and simple to use’. I will take you through it, and you can judge for yourself to what extent it meets these criteria.

The test is largely a series of tests, put together in what I would regard as a relatively complex structure, but one that is intended to be logical. I will attempt to follow these tests through in a logical order.

  1. A person is UK resident for a tax year if he or she satisfies either or both of two tests for that year, being the automatic residence test and the sufficient ties test (see below).
  2. If neither test is met for the relevant year then the individual is not UK resident.
  3. The automatic residence test is not satisfied if any of the automatic overseas tests are met.
  4. The automatic overseas tests are that an individual is not resident in the UK if any of the following apply:
    1. Where the taxpayer was resident in the UK for 1 or more of the 3 tax years preceding the relevant year and has spent less than 16 days in the UK in the relevant year.
    2. Where the taxpayer was not resident in the UK for 1 or more of the 3 tax years preceding the relevant year and has spent less than 46 days in the UK in the relevant year.
    3. Where the taxpayer leaves the UK to carry out full-time work abroad for at least one year, is present in the UK for less than 91 days in the relevant year and spends fewer than 21 days working in the UK in that year, a working day being defined as one on which 3 or more hours of work is carried out. Part of the consultation is as to whether the 21 days should become 26 and the 3 hours should become 5.


  1. If a taxpayer meets none of the overseas tests at 4 above, and meets one of four UK tests, he is automatically UK resident for the relevant tax year. The four UK tests are as follows:


  1. Day count

If an individual spends at least 183 days in the UK, the day count test is satisfied. Presence at midnight at the end of the day constitutes presence in the UK for that day, subject to 2 exceptions.

The first of these is where the taxpayer is in transit through the UK at midnight, and during his or her time in the UK does not engage in any activity unrelated to his or her passage through the UK. For example, if he or she merely sits in an airport terminal waiting for a connecting flight, this exception would apply.

The second exception is where the individual would not be in the UK at midnight on a particular day except for exceptional circumstances beyond his or her control that prevent him or her from leaving the UK, and he or she intends to leave the UK as soon as those circumstances permit.

 Examples given include national or local emergencies such as war, civil unrest or natural disasters (none of which the UK is fortunately prone to) and a sudden or life-threatening illness or injury. It is to be hoped that these are recognised as examples and not as a comprehensive list. Two examples that occur to me that would not be covered by the examples are the flight bans following the 9/11 attacks and as a result of the recent volcanic ash cloud.

There is a statutory limit of 60 days that can be regarded as not spent In the UK as a result of such exceptional circumstances, even a combination of two or more such circumstances. This is more than a little arbitrary; what if a taxpayer is in a coma, for instance?

I have a client who is resident in the Isle of Man but comes over to the UK to tend the family farm at lambing and harvest times. He broke his leg very badly on such a visit, and on the basis that he lives alone in the Isle of Man was advised not to return home until his leg had fully healed.

This resulted in him spending a few months in the UK, and as a result of me obtaining a letter from his doctor confirming his instructions to my client, we were able to satisfy HMRC that he was here due to exceptional circumstances, and did not as a result become UK resident despite breaching the current day rules. That would not have been possible under the new regime, given that my client spent more than 60 days here due to the exceptional circumstances.

The government is considering introducing a specific rule to apply to people who regularly depart from the UK before midnight in an attempt to manipulate the ‘midnight rule’, and are thus present in the UK on a large number of days without being here at midnight.

I could see the need for such a rule if it were required in respect of international commuters, who for example commuted daily from, say, North Western France, the Channel Islands or the Isle of Man, but surely the days working in the UK rule would catch such people in any case. It is quite hard to see in what other circumstances it would be worth the trouble, expense and inconvenience of regular travel in and out of the UK in order to avoid UK residence. Maybe the government has in mind fabulously rich football club owners flying in to see their club play on a regular basis and out again before midnight?

  1. ii.                  Home in the UK

The UK home test is one of the more unsatisfactory aspects of the proposed regime. It is satisfied if an individual’s only home is in the UK or if he or she has more than one home, all of which are in the UK. It must be the individual’s home for at least 91 days, all or part of which fall within the relevant tax year, or if there are 2 separate periods within that year the periods must together add up to at least 91 days. Unhelpfully a home is not defined, although it can be ‘any place’, and can include a vehicle or a vessel, so my putative plan to live in a narrow boat on the Bridgewater Canal will have to be put on hold.

The individual need not have any legal interest in the home, but equally if he or she retains an interest in a property after moving out of it, it will not on that basis alone continue to be regarded as  the individual’s home. I would have thought that went without saying, but maybe this is to clarify the position for former homes which are commercially let. Apparently, ‘a holiday home, weekend home or temporary retreat’ will not count as a home for the purposes of this condition, which I would have thought adds a considerable degree of complexity to the matter in the absence of a general definition of a home.

Representations from professional bodies made it clear that the definition of a home had to be robust in order to avoid uncertainty for taxpayers, and quite frankly the government has ‘bottled’ this issue, or to quote the response to the consultation, has “concluded that it would be extremely difficult to provide a precise definition given the wide variety of living patterns adopted by individuals and their families.”

However, according to the paper, the government is “confident that the vast majority of people will know where their home is and whether that home is in the UK or overseas”. Two thoughts: firstly, presumably those people are expected to be more confident than the government was in failing to define a home, and secondly, it is not simply a matter of knowing where your home is, but also of convincing HMRC that you know, which is rather different. This looks like a recipe for lots of litigation, and to draft modern tax legislation on that basis is utterly unsatisfactory.

A ‘place’ is not defined in statute either – the dictionary definition is “a particular part or portion of space … whether occupied or not ….”, which is not particularly helpful in this context.

  1. iii.                Full-time work in the UK

This test is satisfied if an individual works full-time in the UK for a period of 276 days (there is consultation on extending this to 365 days) during which there are no significant breaks from work, all or part of that period falls in the relevant tax year and more than 75% of the total number of days in the relevant year when more than 3 hours work a day are done are days when that work is done in the UK. Working includes both employed and self-employed work.

A significant break from work is a period of 31 days or more where there is no day on which the individual does more than 3 hours’ work in the UK and the reason for absence is not annual leave or sick leave.

Full-time work is defined as 35 hours or more a week on average over the period, which may be reduced to take account of reasonable periods of leave and of sick leave when an individual cannot be reasonably expected to work because of injury or illness.

Working is doing something in the performance of the duties of an employment or a trade. Travelling time counts as working time if the costs can be deducted from earnings or profits (so not ‘ordinary commuting’) or if the individual carries out work during the course of the journey (e.g. work phone calls or e-mails).

The legislation delivers itself of the profoundly unhelpful statement that “work is done where it is actually done”, except where work is done in the course of travelling. Work done in the course of travel by sea, air or Tunnel from overseas to the UK or vice versa is assumed to be done overseas, and travel starts at the ‘embarkation point’. Whether that is arriving at the airport or boarding the plane is unclear, although logic suggests that passing through passport control (going airside) would be a sensible cut-off point.

  1. iv.                 Death during the year

Proof that the legislative draftsman is all heart comes from the final test, which is satisfied if the individual dies in the relevant year, had for each of the previous 3 tax years been resident in the UK because he had satisfied the automatic residence test, when he died his normal home was in the UK and the preceding tax year would not be a split year for the individual even on the assumption that he was not resident in the UK in the relevant tax year. Taxpayers should thus be advised to take great care over where and when they die.

The sufficient UK ties test applies where an individual meets neither any of the automatic UK tests nor the automatic overseas tests, and is met where the individual has sufficient UK ties. There are a variety of possible circumstances in this respect, depending on residence for the 3 previous tax years and the number of days spent in the UK in the relevant tax year. Still following this ‘simple to use’ system? Good. This is best illustrated by a table:

Days spent in the UK in the relevant tax year Number of ties that are sufficient where an individual has been UK resident in the 3 years preceding the relevant year Number of ties that are sufficient where an individual has not been UK resident in the 3 years preceding the relevant year
More than 15 but fewer than 46 At least four  
More than 45 but fewer than 91 At least three All four
More than 90 but fewer than 121 At least two At least three
More than 120 At least one At least two


Those of you who are still paying attention, and have not yet lost the will to live, will note that there are four possible UK ties for those who have not been UK resident in the 3 previous tax years, whilst I can tell you that there are 5 for those who have been so resident. Fortunately the 4 former ties overlap with 4 of the 5 latter, with an extra tie for the formerly UK resident.

The four common ties are as follows:

  1. i.                    Family tie

An individual has a family tie if there is a relevant relationship at any time between the individual and another person who is resident in the UK in the relevant tax year. Although the draft legislation appears to have been drafted by someone illiterate, it will apparently be amended to define a relevant relationship as one existing at any time between an individual and another person if:

  1. That other person is the individual’s husband, wife or civil partner and they are not separated;
  2. That other person is living with the individual as husband and wife or as civil partners; or
  3. That other person is a child of the individual aged under 18, where the individual sees the child in the UK at any point on more than 60 days in total in the relevant year.

For the purposes of test c, if the child is in full-time education in the UK and spends less than 21 days in the UK outside term time the child is treated as non UK-resident, and thus irrelevant for the purposes of this test.

It is not possible for the residence of spouses to be interdependent on each other, because the legislation specifically says so.

  1. ii.                  Accommodation tie

An individual has an accommodation tie in a relevant year if he has a place to live in the UK which is available to him for a continuous period of at least 91 days during that year and he spends at least one night at that place in that year.

‘A place to live in the UK’ includes a home, holiday home, weekend home, temporary retreat or something similar in the UK, or accommodation is otherwise available to him where he can live when he is in the UK. The individual need not have any legal interest in the property or have any legal right to occupy it. If fewer than 16 days elapse between the periods in which a particular place is available to the individual, that place is treated as being available to that individual for that period.

This should mean that short stays in hotels and guesthouses will not count unless the individual is careless enough to book a room for at least 91 days or the 16-day rule applies. In the latter case this can be avoided by using a different hotel for each separate stay within a 16 day period.

If the accommodation belongs to a parent, grandparent, brother, sister or adult child or grandchild of the individual, the requirement to spend one night is increased to a total of at least 16 nights at that place in that year. The problem with this is that if a friend is always willing to put up the individual the accommodation tie will be satisfied if the individual spends one night at the friend’s house. I can see myself drafting contracts between friends saying that on no account will non-resident friend be allowed to spend more than 15 nights per tax year in resident friend’s house. This could easily be solved by extending the15 night provision to any accommodation occupied for nil consideration.

One of the problems with all this harks back to my recent text about the child benefit tax claw-back “Too Much Information”. The’ living as husband and wife or civil partners’ test will require tax advisers to ask extremely personal questions of clients to whom the accommodation test is relevant, which I am not sure was ever part of my job description, or ever should be.

  1. iii.                Work tie

An individual has a work tie if he works in the UK for at least 40 days in the relevant tax year, work in this context being deemed to be more than 3 hours a day, although the government is consulting on increasing this to 5.

  1. iv.                 90-day tie

An individual has a 90-day tie for the relevant tax year if he has spent more than 90 days in the UK in either the tax year preceding the relevant year, the tax year preceding that year or each of those tax years.

  1. v.                   Country tie (NB only applicable to those resident in the UK in at least 1of the 3 tax years preceding the relevant year)

An individual has a country tie for a relevant year if the country in which he spends the greatest number of days in that year is in the UK. In the event that he spends the same number of days in 2 or more countries in a year and that number is the greatest number of days spent by him in any country, he will have a country tie if one of those countries is the UK.

I am intrigued by the wording of this part of the legislation, specifically:

“if the country in which he spends the greatest number of days in that year is in the UK” (my emboldened italics). Note that it does not say “is the UK”. The implication of this is that the separate parts of the UK will be treated as separate countries for this purpose (perhaps in anticipation of the Scottish independence referendum?). Thus there may be opportunities for judicious planning for taxpayers to divide their time in the UK between the four constituent countries in order to avoid meeting this test. On that basis I can see the Welsh and Scottish borders becoming very popular under the new residence regime.

In summary, anything would be better than the chaos that is UK tax residence, so the new regime will be an improvement. But what a missed opportunity to clarify the position beyond all doubt, to give absolute certainty to taxpayers on their residence status. The legislation is complex, involves subjective concepts (notably “home”) which have not been defined, adequately or indeed at all. It is profoundly unsatisfactory that modern tax legislation should be drafted on such a basis, particularly as there are models, such as the US weighted average day count test, which could give such certainty. “Could do better” has to be the verdict on this draft legislation.