Statutory residence test update

Statutory residence test update

Frequent visitors to the UK need to keep track of the number of days that they are present in the UK, as they could become a UK resident under the statutory residence test and so liable to UK taxation.

Days where you are ‘in transit’ through the UK to another country are not added to your day count under the statutory residence test. A ‘transit’ day is one where you arrive in the UK as a passenger, in the process of travelling to another country, and leave the UK the next day. Provided you do not engage in any activities that are substantially unrelated to your travel through the UK, these days will be regarded as transit days.

HMRC make clear that eating dinner or breakfast in a hotel room would be an activity which would relate to your transit through the UK. In contrast, watching a film at a local cinema or catching up with friends would be regarded by HMRC as being substantially unrelated to your travel through the UK.

HMRC have recently updated their guidance with a further example to show how using social media for work related purposes can lead to a transit day counting as a day of residence in the UK for the purpose of statutory residence test.

HMRC give the example of Simon, a lawyer who lives in France but works internationally. He flies to Canada on a business trip via the UK. He flies into Gatwick Airport on Tuesday evening and flies from Heathrow to Canada at 2 o’clock on Wednesday afternoon.

Simon coincidentally spots a colleague from his London office while he is waiting for his bus to Heathrow. They catch up over coffee talking about their families and recent holidays. In the evening Simon uses social media to look at his colleague’s holiday photos and then exchanges a few emails with him about them. As the meeting was entirely by chance and did not involve any work related issues, the day Simon arrived is treated as a transit day and will not count as a day he was present in the UK.

In contrast, if Simon had discussed work with his colleague from the London office and subsequently used social media to update his boss on the discussion with his colleague, then these acts would be regarded as being unrelated to Simon’s transit through the UK. Therefore, the first day he arrived in the UK would be counted as a day where he was present in the UK for the purposes of the statutory residence test.

Anyone travelling through the UK should therefore take note of the guidelines provided by the HMRC, in order to ensure that they do not accidentally engage in any activities regarded as substantially unrelated to their travel through the UK. This could result in these days being subject to UK income tax and capital gains tax.

For more information please contact James Frampton, Associate in our Tax, Trusts and Succession team on or 01392 687505