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Statutory Residence Test and Remittance Basis Change Consultations issued

The framework for the long awaited statutory residence test is set out in the consultation document issued on Friday 17 June. In a different document of the same day, the proposed changes to the remittance basis rules were also announced. I am pleased to say that both documents are clear and straightforward.  So what are the main points?

The residence test is to be comprised of three parts: Part A Conclusive Non Residence: Part B Conclusive residence and Part C which operates as a tie breaker. The test relies on only four factors other than days of presence which removes nonsense about sports clubs and Wimbledon fortnight etc. The connection factors are:

  • Accommodation
  • Family residence
  • Substantive UK employment or self employment
  • Past residence position

In the tie breaker the more connecting factors with the UK, the fewer days can be spent here before triggering residence. It will also be a slightly different test for leavers than arrivers so it will be a little more difficult to be treated as leaving the UK unless you actually significantly reduce your links here. The tests very broadly aim to encapsulate the current position so that there should be few people where the status changes, but we will be considering all of our clients and explaining to them whether and how they will be affected. It is intended that the new rules will apply for the 2012/2013 tax year.

The Non Dom paper sets out the rules for a tax free remittance to the UK to invest in UK business. It is intended that any remittance to invest in a UK trading or commercial letting business will not attract a tax charge. The consultation paper seeks views as to whether listed companies should be included and whether only new shares should be included or existing ones as well. Only companies will be permitted - not partnerships or trusts but overseas vehicles will be included as possible remitters without penalty. The paper also includes proposals for the simplification of foreign currency and nominated income bank accounts the two last areas have been the subject of much criticism from the Tax Faculty and others in representations I have been involved with. It is very pleasing to see a government response taking our views into account and our initial reaction is a positive one. We will be reviewing the papers in detail and formally responding to the consultation in due course as well as expanding on the analysis of the proposals.

If anyone has any comments or questions please don't hesitate to get in touch.

Lisa is an acknowledged expert on the tax consequences of offshore trusts, and residence and domicile issues and leads Mercer & Hole’s specialist team that focuses on our non UK domiciled clients. She is Chairman of the ICAEW Tax Faculty’s, Private Client Committee and within that leads the working party on non domicile and residence matters.

Lisa Spearman is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Lisa you can call her on 020 7353 1597.

Email Lisa Spearman




Date: 20th June, 2011
Author: Lisa Spearman


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