Changes to UK tax residency to hit expats in SA

HM Revenue & Customs in the UK has been consulting on changes to the residency test, which currently works on the basis that if you are in the UK for 183 days or more in a single tax year, or more than 90 days on average in a single tax year over the previous four tax years, you are a UK resident.

The new test will take three different aspects into account to determine your residency. The statutory residence test (SRT) aims to remove any grey areas when determining someone's residence status for tax purposes in the UK. Existing rules, to a large extent, depend on cases decided by the courts.

New tests

Currently, anyone in the UK for 183 days or more in any one tax year, or more than 90 days on average per tax year over four years, will be classified as a UK resident, and someone who spends no time in the UK is unlikely to be resident. However, the new SRT, which will be divided into three parts (including tests to decide if an individual is "automatically non-resident" or "automatically resident"), will also analyse an individual's connections with and ties to the UK. These include family, property, work and social connections.

The consultation period has recently ended, and tax experts expect further clarification, but the changes should make it easier to determine a person's tax status, and where they are due to make payments. Expats who have been overseas for some time, or those in the UK who own homes overseas, will need to reconsider where they are liable to pay taxes as a result of the changes.