‘Residence’ as a term for UK tax purposes is not defined by law. Current interpretations are largely based on judicial pronouncements. Normally a person shall be regarded as resident in the UK if s/he is physically present in the country for 183 days or more in a tax year. It doesn’t matter if the total stay of 183 days or more is made up of several visits to the country during a tax year which runs from 6 April to 5 April the next year.
From 6 April 2008 onwards a person’s stay in the UK at the end of a day, i.e. at midnight will count as a day of presence in the UK for residence purposes except where transit passengers arrive in the UK in one day to depart the next day to continue their journeys provided they do not take part in any activity like attending a meeting or visiting a property that they own in the UK.
UK tax residents, bitten by the higher 50% tax rate, planning to relocate beware. Taxpayers planning to become residents abroad have been dealt a severe blow with the latest First Tier Tribunal ruling on tax residence. The facts in a long running case involving a British Airways pilot, Lyle Grace, were as under:
- He was UK tax resident till 1997 and became tax resident in South Africa thereafter
- He owned a home in South Africa which he claimed his main home and where he spent nearly as much time as he spent in the UK
- He worked on long haul flights into and out of the UK and as part of his work he spent several short period visits to the UK after piloting hours and stayed in his home near the Gatwick airport.
The tribunal did not agree that Grace was not UK resident as it ruled his conduct was not sufficient to demonstrate that he had made a clean break with the UK. In its ruling the tribunal relied on factors like his employment with the British airline, the frequency of his short visits to the UK and the amount of time he spent in his home in the UK (in fact he stayed at his own home than in a hotel before flying out of the UK.
This only underlines the need for completely severing ties with the UK in order to be considered non-UK resident for tax purposes.
