The Statutory Residence Test (SRT) can provide individuals with welcome certainty in relation to their UK residence status, but it is important not to underestimate the complexity of the rules.
Considered at a high level, the UK Statutory Residence Test is relatively straightforward. There are three main parts, which need to be applied in the following order:
- Automatic Overseas Tests
- Automatic UK Tests
- Sufficient Ties Tests
Automatic Overseas Tests
There are five tests under this heading: if any one of these is met, an individual will be regarded as not resident in the UK in the tax year. In most circumstances, the three key tests are:
- The individual spends fewer than 16 days in the UK and was UK resident in one or more of the three preceding tax years.
- The individual spends fewer than 46 days in the UK and was not UK resident in any of the three preceding tax years.
- The individual works sufficient hours overseas (broadly equivalent to working full-time overseas), with only limited visits to and workdays in the UK.
The remaining two tests cover the position where an individual dies during the year, and are not considered further here.
Automatic UK Tests
If an individual does not meet any of the automatic overseas tests, then the four automatic UK tests must be considered. As the name suggests, if any one of these tests is met, the individual will be regarded as UK resident for the tax year:
- The individual spends at least 183 days in the UK in the tax year (in practice, this is the very first test to consider, as meeting it means that it is impossible to meet any of the automatic overseas tests).
- The individual has a home in the UK which is available for a period of 91 consecutive days or more (at least 30 of which must fall within the tax year), and that home is actually used for at least 30 days in the tax year and they either have no overseas home(s), or, if they do, they spend fewer than 30 days in any overseas home in the tax year (the ‘30 day test’).
- The individual works full-time in the UK for any 365-day period, part of which falls in the tax year (with no significant breaks and subject to various conditions).
Test four again concerns the position where the individual dies in the year, and is not considered further here.
See table in PDF at the bottom of this page.
Sufficient Ties Test
If the above two tests do not provide a conclusive answer, then the sufficient ties test is used to determine residence status. This test requires a taxpayer to consider the number of ties they have with the UK, their UK residence status in the previous three years and the number of days they spend in the UK.
There are a total of five ties, as follows:
Applies if spouse, civil partner, cohabiting partner or minor child is UK resident. Exemption for minor children who are UK resident only because they are in full-time education and who spend limited amounts of time in the UK outside of term time.
Applies if there is accommodation available in the UK for a continuous period of at least 91 days in the year and the individual spends at least one night in that accommodation. Accommodation at the home of a close relative can be ignored if the individual spends fewer than 16 nights there per UK tax year.
Applies if the individual works in the UK for more than three hours a day on at least 40 days in the tax year. HMRC’s suggested definition of work here is broad and includes time spent travelling and training.
Applies if the individual spent more than 90 days in the UK in at least one of the previous two tax years.
Only applicable to individuals who were UK resident in one of the previous three tax years. This tie applies where the UK is the country in which the greatest number of days has been spent in the tax year.
With regards to counting UK days:
- A day is generally counted as a ‘UK day’ when an individual is present in the UK at midnight. This is subject to certain exceptions (including when individuals are transiting through the UK).
- Days of departure will not generally be included in the UK day count for the SRT, unless the deeming rule below applies.
There is also a deeming rule which applies where an individual:
- Was UK resident in one of the previous three tax years; and
- Has at least three UK ties for the current tax year.
The ‘deeming rule’ applies to restrict the number of departure days that can be excluded, to a maximum of 30.
See table in PDF at the bottom of this page.
Split Year Treatment
An individual is, generally speaking, either UK resident for a whole tax year or not. However, where an individual arrives in or leaves the UK part way through a tax year, split year treatment may apply.
Where split year treatment applies, a portion of the year will be designated an ‘overseas part’, for which the individual will be taxed as a non-UK resident. Detailed conditions apply both to determine whether split year treatment applies and, if so, to determine the length of the relevant periods.
Moreover, split year treatment does not apply for the purposes of all income/capital gains tax provisions and so care should be taken before relying on it.
Record Keeping for the SRT
The complexity of the rules notwithstanding, the UK tax system requires residence status to be self-assessed. It is, therefore, important that individuals maintain records to support their self-assessment, should HMRC ever question their residence status. What constitutes appropriate records will vary from case to case, but could include evidence of travel to and from the UK, records supporting particular working times and locations, and records showing how a particular property has been occupied.
Defining Terms used in the Statutory Residence Test
Looking at some of the main concepts around the SRT in a little more detail highlights some of the potential areas of complexity:
- UK days: exceptional circumstances
A maximum of 60 days in a particular UK tax year can be excluded from the calculation of UK days, if they are spent here due to ‘exceptional circumstances’. Examples could include an inability to travel owing to sudden illness, or to the introduction of restrictions on international travel, for example in relation to Covid-19. Each case must be considered on its facts, and with reference to HMRC’s published guidance on the SRT. Accordingly, professional advice should be taken before seeking to rely on the exclusion.
- Full-time work in the UK or overseas for the automatic tests
Broadly, an individual is considered to work full-time if they meet the ‘sufficient hours test’, which generally means that they work 35 hours a week on average over the course of a 365-day period, without any ‘significant break’. You can only be deemed to work full-time overseas if you spend less than 91 days in the UK and the number of days that you work in the UK for more than three hours is less than 31.
- Home and accommodation
The concepts of ‘home’ and ‘accommodation’ are defined differently for SRT purposes.
For the purposes of a statutory residence test, a ‘home’ can be a building, part of a building, a vehicle, vessel or structure of any kind. This is a substantive test. However, HMRC guidance states that it must have a sufficient degree of permanence or stability in the context of the individual’s arrangements to count as their home.
The term ‘accommodation’ (for the accommodation tie) is described more broadly than ‘home’ – it would, for instance, include a holiday home or temporary retreat.
Accommodation will be deemed to be available for the purposes of the accommodation tie throughout any gap of fewer than 16 days in the availability of the property. This can catch, for example, an individual returning to a hotel or temporary accommodation.
Applying the Statutory Residence Test in practice
Although the SRT can provide a clear (and straightforward) answer on UK tax residence, the SRT rules are complex and many terms are specifically defined: each individual should, therefore, ensure that they consider the detailed rules in light of their specific circumstances and ensure that they take appropriate professional advice.
If you want to learn about some exceptional circumstances which may apply to the statutory residence test, please click here for our useful article.
This factsheet is intended only as a summary of the relevant rules which are complex and professional advice should be taken before relying on this. It is based on law and HMRC guidance at 1 January 2023.