Doubt has been cast on the strength of one of the main
tests for determining whether a person is resident in the
UK.
Following a High Court decision last November, it may no longer
be enough to just spend an average of fewer than 91 days a
year in the UK when claiming non-UK residence status.
The case concerned Lyle Dicker Grace, a South African pilot
employed by British Airways flying out of Heathrow. He had
been resident in the UK since 1986, but in 1997 he acquired
a home in Cape Town. From then on he stayed in his UK home
only for brief periods immediately before and after flying
for British Airways and spent an average of fewer than 91
days per tax year in the UK. Grace claimed he was not UK
resident from 1997/98 onwards but the High Court disagreed,
largely because Grace had not left the
UK to live abroad, and was not in the UK for only a temporary
purpose.
Make a break
The case highlights the need for a distinct break where a
former UK resident claims to be non-resident. To be safe,
a UK resident who wants to become non-resident should move
their domestic and business life to another country, and
spend as little time as possible in the UK in the first
tax year of non-residence. The High Court also held that
Mr Grace was not in the UK for a temporary purpose because
he was here to exercise the duties of his permanent employment.
Some commentators have suggested that anyone who lives
abroad but spends two or three days a month, say, working
in the UK for a UK employer is now at risk of being taxed
as a UK resident. Others believe this is very unlikely
though there may be a danger in a few cases. Keep a record
For most people it will remain the case that if your family
and social life is clearly abroad, you are unlikely to
be treated as resident in the UK if you are present on
fewer than 183 days in any tax year and fewer than 91 days
a year on average. You should keep a precise record of
your movements in and out of the UK. Determining residence
status can be complex and needs care. We can advise you
on matters concerning residence and domicile status.
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