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If you are planning on moving to Portugal and you are leaving from the UK, then it is most sensible to ensure you leave the UK properly.

This means you should take note of the Statutory Residence test rules.

 What’s new in Statutory Residence Test?

On 19 March 2020 HMRC issued new guidance about how the SRT would operate as a result of the coronavirus (COVID-19) pandemic which is likely to impact taxpayers’ ability to move freely to and from the UK and require them to unexpectedly have to remain in the UK.

For the purposes of day counting for SRT. If you:

  • are quarantined or advised by a health professional to self-isolate in the UK as a result of the virus
  • find yourself advised by official Government advice not to travel from the UK as a result of the virus
  • are unable to leave the UK due to the closure of international borders
  • are asked by your employer to return to the UK temporarily as a result of the virus

HMRC consider that the circumstances are ‘exceptional’ and you can disregard up to 60 days of those spent in the UK as a result of those circumstances.In August 2020, HMRC confirmed that they will not be extending the 60 day limit for exceptional circumstances, nor will they be relaxing the significant break rule.

HMRC have confirmed that they will not tax the employment income of days worked in the UK due to coronavirus restrictions. Conditions require:

  • The income to be taxed in the home country, and
  • For the individual to have left the UK as soon as they possibly could.

In addition, the Finance Act 2020 has enacted changes to the day count for those non-resident individuals in the UK between 1 March 2020 and 1 June 2020 working on COVID-19 related activities. These activities will not count towards the residence test.

At a glance

A Statutory Residence Test applies from April 2013. It was introduced by the Finance Act 2013. It replaces the previous regime and so much of past case law on residence may be safely ignored.

(references in this note “para” relate to paragraphs in schedule 45 FA 2013)

There are now three tests which determine whether an individual is to be treated as UK resident or non-resident in a tax year:

  • The automatic overseas test: pass this and you are conclusively non-resident
  • The automatic residence test: pass this and you are conclusively resident
  • The sufficient ties test: the tie breaker.

An individual may also become resident or non-resident mid-way through a tax year under split year treatment, which applies when they come or go to work full time, (Split Year Treatment is covered separately).

There are also anti-avoidance rules which when applied treat an individual as being non-resident on a temporary purpose. These apply to the disposal of assets, income from close companies and payments from offshore pension funds.

WARNING NOTE: the SRT is not always conclusive in determining your residence for tax purposes.

  • It is possible that you may also be tax resident in another country under the terms of its own tax rules.
  • If so, you need to also consider the other country’s residence tests: these may be different to the UK’s tests.
  • If you are resident in another country, you will need to review the appropriate double tax treaty with the UK and if necessary, apply the treaty’s own tie breakers.

Anti-avoidance SRT Issues

Part 4 of the Statutory Residence Test (SRT) sets out anti-avoidance provisions which are designed to ensure that an individual cannot avoid UK income tax on income arising in the UK by going abroad and deferring receipt of income until non-resident. These rules apply from 6 April 2013.

Section 10A TCGA 1992 contains provisions for capital gains tax purposes (CGT)

Where the anti-avoidance provisions apply the individual may be treated as being only temporarily non-resident and the effect is that income and gains assessed on a temporary non-UK resident are subject to UK taxes.