1. Introduction
The residence is important as a legal concept because it is related to taxation of individuals, to educational benefits, to drivers licensing, and to vote for municipal elections. The purpose of this article is to provide a brief description of the current rules with regard to residence in the UK.
2. The current rules with regard to residence in the UK
Pursuant to the UK Income Tax Act of 2007, individuals residing in the UK for more than 183 days, even if only for a temporary purpose, are taxed in the UK.
The concept of residence as such is not clearly defined. In case Shepherd v IRC 2006, the court stated that the concepts of residence and ordinary residence should be understood in their natural and ordinary meanings. In this context, the court pointed out that the words “residence” and “to reside” meant “to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place”. The court stressed that “ordinary residence” meant more than mere residence because it connoted residence in a place with some degree of continuity.
Further, the court noted that the question of whether a person was a resident in the UK was a question of fact for the Special Commissioners. In particular, they had to take into account the following circumstances: (1) the duration of an individual’s presence in the United Kingdom, (2) the regularity and frequency of visits, (3) birth, family and business ties, the nature of visits and the connections with this country, (4) the availability of living accommodation in the UK.
In relation to the circumstances decisive for answering the question of whether an individual was a resident of the UK, the court stated that the reduced presence in the UK of an individual whose absences were caused by his employment did not necessarily mean that the individual was not residing in the UK. In the same context, the court stated that the fact that an individual had a home elsewhere was of no consequence. This is because a person might reside in two places but if one of those places was the UK, he was chargeable to tax there.
3. Conclusion
Many people arriving in the UK are surprised by the fact that the concept of residence is not currently defined by legislation, but hinges on the interpretations of various legal cases. Most of these cases happened decades ago when society was at a different level of development.
In order to solve this problem, the UK government plans to introduce a new statutory residence test from April 2013. Although the proposal is still in a draft version, it has been well accepted by the tax profession and will likely to become law in a similar form. To decide on a person’s residence status, the proposed rules look at the number of days in the UK, and several objective criterions, which link an individual to the UK. The test has three parts (A, B, and C). The purpose of parts A and B is to decide on the status for the majority of people whose cases are relatively straightforward. Part C is intended for people with more complicated situations.
