UK Residency Rules

The rules used to determine whether an individual is resident in the UK or not have been devised by the Inland Revenue and are contained in published advice.

The basic rules are summarised below, but it is always important to take proper advice as the rules on ordinary residence are far more complex and, therefore, can often lead to difficulty:

· Individuals will always be resident in the UK if they are presently here for 183 days or more in any single tax year;

· Residence in the UK year after year implies ordinary residence. It is possible to be resident abroad but ordinarily resident in the UK in the same tax year. In such circumstances it is important to see if relief from a double taxation treaty is available;

· Visitors who come to the UK are also treated as resident here if they are present for an average of 91 days or more over a four year period. Regular visitors who exceed the 91 days test are also treated as ordinarily resident here;

· Longer term visitors who come to the UK for a specific purpose, i.e. for employment, are treated as resident from the day of arrival if they intend to remain in the UK for at least two years. The individual will also be treated as ordinarily resident from the day of arrival if the intention is to stay for at least three years.

The determination of UK residence is an important factor as it is a trigger for liability to UK taxation, the extent of which will also depend on the individual's domicile.

By contrast, someone who is non-UK resident is not liable to UK income tax, except on UK source income. Liability to Capital Gains Tax is determined solely by residence and ordinarily residence status. Someone who is non-UK resident and non-UK ordinarily resident is not liable to Capital Gains Tax on the disposal of any asset, even if the asset is one situated in the UK. However, in relation to people who have been resident in the UK there are now new rules on temporary non-residence to prevent people from leaving the UK to avoid Capital Gains Tax. These rules are complex and advice should always be taken.