Residence

The Government has published the summary of responses to the statutory definition of tax residence consultation along with draft legislation. The Government intends to introduce the statutory definition of tax residence and reforms to ordinary residence in Finance Bill 2013. The closing date for comments is 13 September 2012.

The consultation received around 120 responses from a mix of individuals and organisations.

After considering the views put forward, the Government announced at Budget 2012 that the concept of ordinary residence would be abolished for tax purposes and overseas workday relief would be retained and placed on a statutory footing.

In relation to the statutory residence proposals, the main changes and clarifications that the Government will make following the consultation are:

•The threshold for automatic non-residence for individuals who have been resident in one or more of the previous three tax years will be raised from 10 to 15 days.

•International transportation workers will be excluded from being eligible for Full Time Work Abroad.

•The ‘family’ connection factor will be amended so that only time spent with a child in the UK will be relevant.

•The definition of accommodation will be simplified and will apply where an individual has accommodation that is available to be used by them for a continuous period of at least 91 days in a tax year and the individual spends at least one night in that place during the tax year.

•Day counting: there will be a provision for exceptional circumstances which will allow days of presence to be disregarded where an individual spends a day in the UK for reasons beyond their control.

•Split year treatment: the conditions will be amended for individuals who leave the UK to live abroad. In particular, they will be able to spend up to 15 days in the UK in the part of the tax year after their departure.

The Government will consult further on alternative options to amend the definition of full time work abroad. Also, the Government will consult further on whether to increase the qualifying period for full time work in the UK from 9 months to 12 months.

The Government launched a consultation on a statutory tax residence test for individuals at Budget 2011. On 6 December 2011 it was announced that the introduction of the statutory residence test and reforms to ordinary residence would be deferred until 6 April 2013 to give more time for further consultation.

The summary of responses and draft legislation is available from HM Treasury.