Home or away? Tax residence is still a difficult match

Thursday 25th June, 2015
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Personal tax

Individual contractors who are coming to or leaving the UK need to be aware of how residence is determined. This includes those moving for short term reasons, such as work contracts, or longer term reasons such as permanent moves to the UK or abroad.

Overseas contractors who carry out work or business in the UK and ex-pats who have connections to the UK through family or property or visit the UK regularly should seek advice to determine their residence status here.

Individuals should not simply rely on being in the UK for fewer than 90 days a year, as in some cases under the UK Statutory Residence Test introduced from April 2013, spending as few as 16 days in the UK can lead to being taxed as a resident here, potentially causing worldwide income and gains to be taxable in the UK.

Conversely, with careful planning and timing, it is possible in some circumstances to spend 182 days in the UK (or possibly more under the rules of double taxation treaties on certain income) without becoming a UK tax resident.

An individual’s residence status can also impact on the exposure to tax for companies with which they are associated as directors or material shareholders.

The interaction between the contractor’s exposure to tax and social security contributions in the UK and in any other country should be taken into account if an overseas contract is being considered.

HMRC have designed an online Tax Residence Indicator to assist individuals in helping to determine their UK tax residence status. If contractors are still unsure, find difficulty in completing the Indicator or just want a third party view of their residence status, PayStream's Tax Team are able to help. Simply email tax@paystream.co.uk with your query or call 0161 929 6000 (option 3).



Conversely, with careful planning and timing, it is possible in some circumstances to spend 182 days in the UK (or possibly more under the rules of double taxation treaties on certain income) without becoming a UK tax resident.

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