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The Statutory Residence Test And Working Abroad

It's easy to fall foul of ...



The Statutory Residence Test (SRT) has been with us now for some years. While it provides more certainty for taxpayers as to whether they are a non-UK resident for a particular tax year, the rules are rigid ...

If you fall foul of the Statutory Residence Test you may end up paying a significant amount of tax!

If you fall foul of the Statutory Residence Test you may end up paying a significant amount of tax!

copyright: grooversyd / 123rf stock photo

This blog post has been prompted by a situation that one of my clients has experienced recently. It highlights the issues around the case for working full time abroad and the consequence of ceasing employment, perhaps before you had anticipated.

The first step anyone needs to take to establish if they have UK residence or not is to look at the basic rules, which establish whether an individual is either:

  • conclusively non-resident: 'the automatic overseas test', or

  • conclusively resident: 'the automatic residence test',

  • or whether, if neither of these apply, it will be necessary to consider other connection factors and day counting: 'the sufficient ties test'.

One of the 'automatic overseas tests' will apply when an individual leaves the UK to carry out full-time work abroad for at least a complete tax year. Provided they are present in the UK for no more than 90 days in the relevant tax year and no more than 30 days are spent working in the UK in that tax year, the individual should be treated as non-UK resident.

The broad criteria for meeting The Sufficient Hours Overseas Test are:

  • you work sufficient hours overseas (35 hours on average per week) during the tax year concerned,

  • during the tax year, there are no significant breaks (less than 31 days) from overseas work,

  • the number of days in the tax year that you do more than 3 hours' work in the UK is less than 31,

  • you spend less than 91 days in the UK in the tax year.

My client, Charlotte, left the UK in January 2017 to take up full-time employment in the UAE. I confirmed that as long as she was working full-time abroad and satisfied the criteria for being a non-resident throughout the remainder of 2016/17 and all of 2017/18, she would be deemed to be non-UK resident from the date she left.

"However, on 16 October 2017, Charlotte returned to the UK quite unexpectedly!"

Her contract had ceased early and she was planning on having a well-earned break, visit family and friends, until she found her next contract. Fortunately, she remembered that I had told her that to remain non-resident she could only spend a fixed number of days in the UK and so she dropped me an email to let me know of her return.

I was immediately concerned that, depending on the length of her break between contracts, she may not satisfy The Sufficient Hours Overseas test because she would have a significant break (in excess of 30 days).

If Charlotte ceased her employment contract on 16 October and does not enter into a new contract of employment by 14 November and then work at least 3 hours overseas (or would do if she were not on annual leave) then she will be deemed to be UK resident. As such, all of her overseas income, which she has to date paid no tax on, will become subject to tax in the UK.

Fortunately, for Charlotte, she has found a new contract and they want her to start immediately. Things look positive that she will meet the 14 November deadline.

Charlotte's next challenge will be to meet the 35 hours a week on average. Although she will have had a break of 30 days, only 15 of those days will be excluded for the purpose of calculating the 35 hours a week on average. This means that Charlotte will have to work an extra 70 hours to make up for this break.

"She was very sensible to
advise me so early!"

If you are in this situation, don't leave it too late to contact your tax advisor. If you don't have one and need to talk to someone about the Statutory Residence Test, call me on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.