The Statutory Residence Test (“SRT”) is the UK’s tax law to determine tax residency for an individual. The SRT has been in place since 6 April 2013, and prior to that, there was no definitive test which left taxpayers in doubt as to whether they were within or outside the UK tax system. Whilst the SRT is complex (over 100 pages long) it has given taxpayers certainty over their residency status and individuals can now plan their tax affairs with greater confidence.
Blick Rothenberg participated in a meeting in August 2015 at HM Treasury which discussed the practical workings of the SRT, over two years since its introduction. Representatives from HM Revenue & Customs (“HMRC”) also attended and provided valuable insight into their views and interpretation of the SRT.
HMRC were strong in their views that they expect the SRT will be a key feature of the UK tax legislation for the foreseeable future, and are not anticipating any significant alterations or amendments within the next five years.
This is good news for individuals seeking to have certainty over their UK residency status, and will particularly help internationally mobile persons plan their tax affairs effectively, as well as those arriving or leaving the UK.
HMRC are particularly focussed on the third automatic overseas test, known as the “sufficient ties test”, applicable for those individuals working full-time outside the UK, and see this as a risk area. HMRC suggested that the detailed calculations involved in this part of the SRT will be scrutinised closely, and they advised that comprehensive supporting documents and evidence would be required for a claim to be accepted.
Whilst HMRC’s views on the SRT are not unexpected, their comments confirm the onerous administrative responsibilities individuals now face, and firmly places the burden of proof onto the taxpayer.
HMRC will look to enforce the rules contained in the SRT legislation extremely strictly, with very little flexibility e.g. in respect of remittances to the UK and also when claiming to “split” the tax year into a resident and non-resident period. It is therefore more important than ever that individuals seek professional advice and plan their presence in the UK in advance, as residence is a fundamental concept of the UK tax system and can have significant financial implications.
Blick Rothenberg has extensive detailed experience of the SRT and has provided advice to individuals looking to take-up UK tax residency or break it. We were also awarded the best International and Expatriate Tax Team at the 2015 Taxation Awards. Recognised as a mark of excellence within the sector, the awards were judged by a panel of leading professionals and officers of major tax institutions. If you would like to discuss how Blick Rothenberg can advise you and plan around your tax residency, please contact your usual Blick Rothenberg contact or one of the names listed below:
Caroline Le Jeune Mark Abbs Robert Pullen
Private Client Expatriate Tax Private Client