Treasury has released a document, released under Freedom of Information, relating to a Board of Tax, call it had the UK Her Majesty’s Revenue and Customs (HMRC) in October 2016, relating to their experience with their move to a ‘Statutory Rules Test’ for residency of individuals in the UK. [See Tax Technical – Tax Article]

This is topical, in Australia, in the light of:

Some of the key points to come out of this document, are as follows.

  1. Their key problem with their common law based system was the level of complexity.
  2. They found a straight forward ‘count the days’ test could not achieve the desired outcomes, on their own. So, the tests revert to ‘significant ties’ with the UK, where needed.
  3. They deliberately had different tests for becoming resident and ceasing to be resident – to make it easier to become a resident and harder to break UK residence.
  4. Somewhat counter intuitively, the new test was much longer (160 clauses v’s 4 clauses for the old test) but it achieved its objective of compliance savings (down to a level they had never seen before). The level of litigation and audit activity (under the new rules) fell radically.
  5. They found that the new rules were very clear and produce a very clear outcome.
  6. The measure was developed as a ‘revenue neutral’ one, but it was too early to say whether that is the case or not.
  7. There were some unintended consequences. Some groups who were always regarded as residents, were no longer residents (eg. teachers). Likewise there were some ‘losers’ but they thought that this was not significant.
  8. They also inserted specific rules for people working in certain jobs, such as international transport workers, fishermen working off-shore and lorry drivers.
  9. Circumstances were, in some ways, different for the UK because of its (current) status as part of the European Union.

FJM 25.9.18

[Treasury website: FOI Release; Statutory Residence Test; LTN 183, 21.9.18; Tax Month – September 2018]

CPD questions (answers available)

  1. Was it back in 2016, that the Board of Tax had the call to HMRC – the notes of which have only now been released under FOI?
  2. Did the UK move from a common law test of residency, to a ‘statutory rules test’?
  3. Is it simply a ‘count the days’ test?
  4. Is it shorter?
  5. Does it produce a more certain result?
  6. Were there ‘winners and losers’?


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