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Is the new statutory residency test really straightforward?

Is the new statutory residency test really straightforward?

Non-domicile clients of contractor accountants might know that their tax status has been causing confusion over recent years and the government has now announced its plan to make the system simpler to understand.

According to the Treasury, the current rules surrounding residency are complicated, vague and subjective so it is going to introduce a straightforward statutory residence test.

The framework for the STR test will take into consideration the length of time spent in the UK as well as other connections to the country. It also lays down a distinction between ‘arrivers’, people who have not been resident in the past three years, and ‘leavers’ who were resident during at least one of the past three tax years.

Non-residents will be people who spend less than 10 days per year in the UK, or work abroad full time. Anyone who has been classed as a non-resident for the past three tax years will continue to be classed as such providing they spend less than 45 days in this country during the current tax year.

A definite resident is somebody who spends more than 183 days per year in this country or whose only home is situated in the UK.

Obviously a large number of people will not fall into either of the above categories and their status will be decided based on four factors. These are: having a family resident in this country, substantive UK employment, accommodation they can access in the UK and whether they have spent 90 days or more in Britain in either of the preceding two tax years.

To complicate matters slightly, the amount of factors taken into consideration will depend on the length of time people spend in this country in the current tax year.

PwC’s international mobility partner, Sean Drury, says the 10 day rule is extremely restrictive and says clear exemptions are needed for thinks like visiting ageing or sick family members.

A tax expert from PKF warned that the complicated connection factors sounded like a recipe for disaster and he predicted court cases would ensue to determine the precise workings.

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Image: You look confused and you dont know what to do by Alex Bellink

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