Statutory Residence Test

The statutory residence test allows individuals to work out their UK residence status for a tax year.

Under the statutory residence test, there is a relief that can be applied to exclude any day from an individual’s UK day-count that is incurred as a result of ‘exceptional circumstances beyond the control of the individual which prevents them from leaving the UK.’ The number of ‘exceptional’ days is limited to 60 days in the tax year.

Statutory Residence Test

The statutory residence test involves a sequence of tests applicable to each tax year:

Initially, individuals must determine whether they fulfill any of the automatic overseas tests. If they do, they are considered not UK tax resident for the relevant tax year.
If they do not meet any of the automatic overseas tests, then individual must next assess whether they meet any of the automatic UK tests. Fulfilling these tests designates them as UK tax resident for the tax year in question.
If none of the automatic UK tests are met, the individual must proceed to the sufficient ties test, which factors in both their days present in the UK and their ties to the country.

Should an individual be classified as a UK resident for a tax year, they may be able to explore eligibility for split year treatment. This treatment is applicable in the year of an individual’s relocation to, or departure from the UK. If the individual satisfies the necessary criteria, the tax year is divided into a UK part and an overseas part. The individual is then taxed as a non-UK resident for certain tax provisions during their overseas part of the tax year.

The Statutory Residence Test applies to individuals alive throughout the tax year under consideration.

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Individuals who may be affected should:

Ascertain their day count to date for the current tax year (broadly the number of midnights spent in the UK from 6 April to date)
Consider how they may deal with the situation practically if these exceptional circumstances are likely to last beyond 60 days (this is more likely to be an issue for the 2020/21 tax year which starts on 5 April)
If it is likely the individual will become UK resident in the next tax year, it may still be possible to carry out certain pre-immigration planning now.

The situation is complex. If you’re affected by any of these issues, Price Bailey can support you with practical advice on the number of days individuals can spend in the UK based on their specific circumstances to ensure that unwanted tax liabilities do not arise.

If you have any questions regarding where you stand with regards to this, or you would like some further support or advice, you can contact our Tax team on the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.