Finance Act 2013 replaced a mish-mash of practices, guidelines and decisions on residency dating back to the nineteenth century with an objective set of rules. True, the application of the rules can be complex, but in most cases following them through gives a clear result: it is nowadays usually possible to say what a person’s UK residence status is (or rather, has been – the rules are essentially backward-looking) with a much greater degree of certainty than was possible before 2013. And, by the same token, advising what needs to be done to secure non-resident status is now much less of a finger-in-the-air exercise than it used to be.
However, determining UK residence status is only half the job. Or perhaps just a quarter.
It’s also necessary to consider what the residency position is in other countries. It’s vital to take expert local advice, of course: but even then, it can be distressingly difficult to obtain a definitive answer. Not every country has the UK’s commendably clear bright line tests: subjective concepts such as where your ‘main base’ or ‘economic base’ is to be found are all too common. Even where a country’s residence rules have regard to the days in which you are present in the country, the tests for deciding which days count may vary. In the UK, it’s (usually) presence at midnight that is relevant: elsewhere, presence at any time during the day may need to be taken into account. Sometimes, as in Spain, you can even be treated as present in a country on a day when you don’t actually set foot in it. In short, if you have any substantial connection with a country, or you spend more than trivial amounts of time in it, seek local advice on residency.
Next, it may be that you are unequivocally resident in both Country X and Country Y under each country’s domestic rules. Then, the dreaded tie-break will have to be considered (assuming that there is a double taxation treaty in place) in order to establish a pecking order between the claims of the two jurisdictions. That usually requires consideration of unsatisfactorily subjective things such as where you have a ‘permanent home’ available and where your ‘centre of vital interests’ is.
Finally, don’t overlook the possibility that you may be liable to pay tax in a country even though you are not resident in it. Most people recognise that possibility in respect of a trade or property investment located within the country’s borders: but (especially if you are tax-resident nowhere so lack the protection of a double taxation treaty) you may in principle be liable to tax in a country if you there perform the duties of any employment (even if your employer has no presence in the country) or of any business (even though you lack any ‘permanent establishment’ in the country). Again, local advice is key.
For more information about tax residency and the tax implications of your situation, please get in touch with your usual BKL contact or use our enquiry form.
We have more details about being resident for tax purposes nowhere, also known as tax nomad status, in our earlier article.