Statutory Residence Test - HM Revenue & Customs

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Split Year Treatment Case 1: UK part of a tax year 5.15 The UK part of the tax year is the period from the start of the tax year until the start of the overseas part. Example 33 Richard has lived and worked in London for the last ten years and is UK resident for tax purposes. He is seconded abroad by his employer for a three year period. His overseas contract starts on 3 November 2014 when he takes up duty at his new office in Madrid. This example assumes he fails the third automatic overseas test for 2014-15 but meets it for 2015-16. On 2 December 2014 he returns to the UK office to finish off a project he was involved in before his secondment. His work in the UK is completed on 16 December 2014 (11 UK workdays and four non-working days). He then takes leave until 28 December (12 days) flying back to Madrid and resuming work on 29 December. On his return to Madrid he works only at the Madrid office until 5 April. Richard calculates that he meets the criteria for Case 1 split year treatment from 3 November, this being the first date on which he works for more than three hours overseas. Using table E he calculates that between 3 November 2013 and 5 April 2015 he can spend 37 days in the UK and work for more than three hours in the UK for up to 12 days. Richard determines that: - he was UK resident for the previous tax year (2013-14) - he is resident in the UK for the current year (2014-15) and that he does not meet the third automatic overseas test - he was non-UK resident for 2015-16 - he calculates that he meets the sufficient hours overseas test for the period 3 November 2014 to 5 April 2015 - he did not exceed the limits of 12 UK work days and 37 days spent in the UK between 3 November 2014 and 5 April 2015, and - he had no significant break from overseas work during the period. To determine that he worked full time overseas during a relevant period, Richard did the calculations below. (Continues on next page) RDR3 54
Split Year Treatment His reference period; Days in the period 3 November 2014 to 5 April 2015 = 155 Less - Disregarded days 11 (Days spent working more than three hours in the UK) - Annual, sick and parental leave 8 (leave on 17, 18, 19, 22, 23, 24, 27 and 28 December) - Embedded non-working days 2 (20 &21 December) - Gaps between employments Nil Total 21 Reference Period = 134 days Sufficient Hours <strong>Test</strong> All hours worked overseas from 3 November 670 Less Hours worked overseas on disregarded days Nil Net overseas Hours 670 Divide Reference Period by 7 (134÷7) = 19.14 (rounded down) = 19 Divide net overseas hours by 19 (670÷19) = 35.26 Richard meets the sufficient hours overseas test because his average over the reference period (3 November 2014 to 5 April 2015) is more than 35. For Richard, the UK part of the tax year ends on the 2 November 2014 and the overseas part starts on 3 November 2014 (the earliest date from which he meets all the conditions of the sufficient hours overseas test. (Example 34 on next page.) RDR3 55
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Guidance Note: Statutory Residence
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Annex C Example C4 Clara is 14 year
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