HMRC seeks to clear up residency definition


Her Majesty’s Revenue and Customs are seeking to finally clear up the muddled laws surrounding UK residency.

Expats who leave the United Kingdom often attempt to become UK non-resident, and in turn decrease their liability for UK tax. However, an alarming trend has seen the residency status of expats called into question by HMRC. The much maligned residency rules are almost always reliant on individual cases and in a bid to bring some clarity to the issue HMRC are now consulting on the possibility of creating a final legal definition of tax residency. HMRC has itself said that the rules are unclear and complicated, and so has taken action to rectify things.

John Whiting, tax policy director at the Chartered Institute of Taxation said: "The rules on tax residence are jumbled and uncertain and are far from what we need for a modern tax system. The aim must be for a statutory test to give businesses and individuals certainty in this increasingly mobile world. We cannot have rules dating from the age of sail and Morse code and heavily dependent on HMRC's views governing what happens in the 21st century.”

Currently, guidelines regarding non-residency state that the following guidelines should be followed to have a chance of being non-resident : Expats must have been non-resident in the UK for the past three years, but present in the UK for fewer than 45 days in the current tax year; Expats must have been out of the UK for one year, and present in the UK for fewer than 10 days of the current tax year; Expats must have left the UK to work overseas full-time and spend fewer than 90 days in the UK per tax year.

However, each instance that ends up in court invariably comes down to individual circumstances, and expats who feel they have adequately met the guidelines are sometimes still handed hefty tax bills. This decision to finally establish the definition is good news for expats, gain an insight into how the current rules work in our Income Tax and Residency section.