Residence Test: legislation at last
This time last year we were disappointed with the deferral of the statutory residence test. Since then the omnishambles of the March 2012 budget, the huge amount of noise about pasties, charities and granny tax binned with recent furore re tax schemes meant the SRT has faded a little from the forefront of our minds but now it's back.
The response document and the draft legislation was published on 21 June and in my view it was worth the wait.
The legislation is in the format that we discussed last year and retains the three elements of test:
- Part A Conclusively Resident factors
- Part B Conclusively non resident factors
- Part C Effective Ties with the UK and day count comparison if A or B do not apply.
As before there are specific rules for split years, expats and slightly different rules depending on whether you are coming into or leaving the UK.
The original proposals needed some clarification around definitions and there were some elements that raised questions as to proof and record keeping but the responses have been carefully considered and there have been some sensible relaxations and adjustments. There are a few areas where additional questions have been put forward and we will be responding to these in conjunction with the ICAEW tax faculty shortly but there is undoubtedly a strong framework and there is every hope that the legislation will come into force from 6 April 2013.
The draft legislation is clear and although it is not brief it is some of the better legislation we have seen in a long time which makes the wait entirely justified. There is an online tool in a flowchart format which should enable the majority of people to reach a conclusion on their individual positions but as ever there are fine points of detail to be taken into account. Overall the draft is a testament to the wisdom of proper consultation and of government listening to the representations made.
We will be preparing a note for our clients as to the detail of the test which will be revised as the legislation develops but for now the advice from last year stands: If you can plan ahead and bear in mind that actions in year one can impact on year two etc and seek advice at an early stage if you have any doubt as to your current residence position or you are considering a move.
Date: 22nd June, 2012
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