Residency and Income Tax’

Q:  I have recently accepted a full time position overseas on a three year contract. How will this affect my UK residency and income tax position?
Anon, Edinburgh

A:  Determination of residency can be a very complex area and you should seek detailed professional advice based on your specific individual circumstances.

In general, a UK domiciled and resident individual is liable to UK tax on worldwide income and gains. A UK domiciled but non-resident individual is liable to UK tax on UK income, certain other income and certain gains.

Whether or not an individual is UK resident is determined by application of the Statutory Residence Test (SRT) to their particular circumstances. Each tax year is looked at separately and the individual is categorised as either resident or non-resident for that tax year.

The SRT is made up of three parts. The first part is an ‘automatic overseas’ test which, if met, categorises the individual as non-resident for UK tax purposes. If this test is not met, an ‘automatic UK’ test is applied which, if met, categorises the individual as resident for UK tax purposes. If neither of these tests are met, then the number of ‘significant ties’ that the individual has to the UK is considered together with the number of days that the individual is present in the UK during that tax year.

The SRT determines whether an individual is resident or non-resident in the UK for the full tax year under consideration however, where an individual starts to live or work abroad or comes from abroad to live and work in the UK during a tax year, it may be possible to split the tax year into two parts, resident and non-resident, if certain criteria are met.

Rennie Welch LLP accept no liability on the basis of this article and detailed advice, taking into account individual circumstances, should be obtained before entering into any transaction.

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