Tax Bite – Breaking UK Residence

We are often asked by individuals what they need to do to break residence with the UK and in particular what is the maximum number of days that they can spend in the UK. The rules for this recently changed with the introduction of the statutory non-residence test. Most flowcharts on this subject are quite confusing so we created the attached flowchart to help answer just this type of question. Some interesting points arise from the rules which are embedded within this flowchart:

Statutory Residence Test Flowchart

  1. Quite often an individual will be able to spend 90 days in the UK and still not be UK resident in his or her first year ‘away’.
  2. The precise answer depends on the number of ‘connection factors’ but you should note here that family is only a connection factor if a wife or minor child remains in the UK.
  3. As the day count is based on number of midnights in the UK, in some cases it will be possible to be in the UK for 180 days (and not breach the 90 day limit) provided that these are made up of short visits with a single overnight stay.

However great care is required in advising on the tax implications of being non-resident. For example there is anti-avoidance legislation for income tax and capital gains tax which often means that an individual will need to be non-resident for 5 full tax years for there to be any tax benefits. Otherwise they face the prospect of a tax charge when they arrive back in the UK.

In general these new rules are useful as they provide us with an objective definition of what it is to be non-resident. However formal advice should always be sought in connection with any proposal to go non-resident as there is plenty of scope to trip up on the rules.

 

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