Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
501

      (4)
The Tables in paragraphs 18 and 19 show how many ties are sufficient in
each case.
Sufficient UK ties
18
The Table below shows how many UK ties are sufficient in a case where P
was resident in the UK for one or more of the 3 tax years preceding year X—
5

Days spent by P in the UK
Number of ties that are

in year X
sufficient

More than 15 but not
At least 4

more than 45

More than 45 but not
At least 3

10

more than 90

More than 90 but not
At least 2

more than 120

More than 120
At least 1

15
19
The Table below shows how many UK ties are sufficient in a case where P
was resident in the UK for none of the 3 tax years preceding year X—

Days spent by P in the UK
Number of ties that are

in year X
sufficient

More than 45 but not
All 4

20

more than 90

More than 90 but not
At least 3

more than 120

More than 120
At least 2

25
20    (1)
If P dies in year X, paragraph 18 has effect as if the words “More than 15 but”
were omitted from the first column of the Table.
      (2)
In addition to that modification, if the death occurs before 1 March in year
X, paragraphs 18 and 19 have effect as if each number of days mentioned in
the first column of the Table were reduced by the appropriate number.
30
      (3)
The appropriate number is found by multiplying the number of days, in
each case, by—

where “A” is the number of whole months in year X after the month in which
P dies.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
502

      (4)
If, for any number of days, the appropriate number is not a whole number,
the appropriate number is to be rounded up or down as follows—
(a)
if the first figure after the decimal point is 5 or more, round the
appropriate number up to the nearest whole number,
(b)
otherwise, round it down to the nearest whole number.
5
Part 2
Key concepts
Introduction
21
This Part of this Schedule defines some key concepts for the purposes of this
Schedule.
10
Days spent
22    (1)
If P is present in the UK at the end of a day, that day counts as a day spent
by P in the UK.
      (2)
But it does not do so in the following two cases.
      (3)
The first case is where—
15
(a)
P only arrives in the UK as a passenger on that day,
(b)
P leaves the UK the next day, and
(c)
between arrival and departure, P does not engage in activities that
are to a substantial extent unrelated to P’s passage through the UK.
      (4)
The second case is where—
20
(a)
P would not be present in the UK at the end of that day but for
exceptional circumstances beyond P’s control that prevent P from
leaving the UK, and
(b)
P intends to leave the UK as soon as those circumstances permit.
      (5)
Examples of circumstances that may be “exceptional” are—
25
(a)
national or local emergencies such as war, civil unrest or natural
disasters, and
(b)
a sudden or life-threatening illness or injury.
      (6)
For a tax year—
(a)
the maximum number of days to which sub-paragraph (2) may
30
apply in reliance on sub-paragraph (4) is limited to 60, and
(b)
accordingly, once the number of days within sub-paragraph (4)
reaches 60 (counting forward from the start of the tax year), any
subsequent days within that sub-paragraph, whether involving the
same or different exceptional circumstances, will count as days spent
35
by P in the UK.
23    (1)
If P is not present in the UK at the end of a day, that day does not count as a
day spent by P in the UK.
      (2)
This is subject to the deeming rule.
      (3)
The deeming rule applies if—
40
(a)
P has at least 3 UK ties for a tax year,

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
503

(b)
the number of days in that tax year when P is present in the UK at
some point in the day but not at the end of the day (“qualifying
days”) is more than 30, and
(c)
P was resident in the UK for at least one of the 3 tax years preceding
that tax year.
5
      (4)
The deeming rule is that, once the number of qualifying days in the tax year
reaches 30 (counting forward from the start of the tax year), each subsequent
qualifying day in the tax year is to be treated as a day spent by P in the UK.
      (5)
The deeming rule does not apply for the purposes of sub-paragraph (3)(a)
(so, in deciding for those purposes whether P has a 90-day tie, qualifying
10
days in excess of 30 are not to be treated as days spent by P in the UK).
Days spent “in” a period
24
Any reference to a number of days spent in the UK “in” a given period is a
reference to the total number of days spent there (in aggregate) in that
period, whether continuously or intermittently.
15
Home
25    (1)
A person’s home could be a building or part of a building or, for example, a
vehicle, vessel or structure of any kind.
      (2)
Whether, for a given building, vehicle, vessel, structure or the like, there is a
sufficient degree of permanence or stability about P’s arrangements there for
20
the place to count as P’s home (or one of P’s homes) will depend on all the
circumstances of the case.
      (3)
But somewhere that P uses periodically as nothing more than a holiday
home or temporary retreat (or something similar) does not count as a home
of P’s.
25
      (4)
A place may count as a home of P’s whether or not P holds any estate or
interest in it (and references to “having” a home are to be read accordingly).
      (5)
Somewhere that was P’s home does not continue to count as such merely
because P continues to hold an estate or interest in it after P has moved out
(for example, if P is in the process of selling it or has let or sub-let it, having
30
set up home elsewhere).
Work
26    (1)
P is considered to be “working” (or doing “work”) at any time when P is
doing something—
(a)
in the performance of duties of an employment held by P, or
35
(b)
in the course of a trade carried on by P (alone or in partnership).
      (2)
In deciding whether something is being done in the performance of duties
of an employment, regard must be had to whether, if value were received by
P for doing the thing, it would fall within the definition of employment
income in section 7 of ITEPA 2003.
40
      (3)
In deciding whether something is being done in the course of a trade, regard
must be had to whether, if expenses were incurred by P in doing the thing,

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
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the expenses could be deducted in calculating the profits of the trade for
income tax purposes.
      (4)
Time spent travelling counts as time spent working—
(a)
if the cost of the journey could, if it were incurred by P, be deducted
in calculating P’s earnings from that employment under section 337,
5
338, 340 or 342 of ITEPA 2003 or, as the case may be, in calculating
the profits of the trade under ITTOIA 2005, or
(b)
to the extent that P does something else during the journey that
would itself count as work in accordance with this paragraph.
      (5)
Time spent undertaking training counts as time spent working if—
10
(a)
in the case of an employment held by P, the training is provided or
paid for by the employer and is undertaken to help P in performing
duties of the employment, and
(b)
in the case of a trade carried on by P, the cost of the training could be
deducted in calculating the profits of the trade for income tax
15
purposes.
      (6)
Sub-paragraphs (4) and (5) have effect without prejudice to the generality of
sub-paragraphs (2) and (3).
      (7)
Assume for the purposes of sub-paragraphs (2) to (5) that P is someone who
is chargeable to income tax under ITEPA 2003 or ITTOIA 2005.
20
      (8)
A voluntary post for which P has no contract of service does not count as an
employment for the purposes of this Schedule.
Location of work
27    (1)
Work is done where it is actually done, regardless of where the employment
is held or the trade is carried on by P.
25
      (2)
But work done by way of or in the course of travelling to or from the UK by
air or sea or via a tunnel under the sea is assumed to be done overseas even
during the part of the journey in or over the UK.
      (3)
For these purposes, travelling to or from the UK is taken to—
(a)
begin when P boards the aircraft, ship or train that is bound for a
30
destination in the UK or (as the case may be) overseas, and
(b)
end when P disembarks from that aircraft, ship or train.
      (4)
This paragraph is subject to express provisions in this Schedule about the
location of work done by people with relevant jobs on board vehicles,
aircraft or ships.
35
Rules for calculating the reference period
28    (1)
This paragraph applies in calculating the “reference period” (which is a step
taken in determining whether P works “sufficient hours in the UK” or
“sufficient hours overseas” as assessed over a given period of days).
      (2)
The number of days in the given period may be reduced to take account of—
40
(a)
reasonable amounts of annual leave or parenting leave taken by P
during the period (for all employments held and trades carried on by
P during the period, whether in the UK or overseas),

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
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(b)
absences from work at times during the period when P is on sick
leave and cannot reasonably be expected to work as a result of the
illness or injury in question, and
(c)
non-working days embedded within a block of leave for which a
reduction is made under paragraph (a) or (b).
5
      (3)
But no reduction may be made in respect of any day that is a “disregarded
day” (see paragraphs 9(2) and 14(3) in Part 1 of this Schedule).
      (4)
For any particular employment or trade, “reasonable” amounts of annual
leave or parenting leave are to be assessed having regard to (among other
things)—
10
(a)
the nature of the work, and
(b)
the country or countries where P is working.
      (5)
Non-working days are “embedded within” a block of leave only if there are,
as part of that block of leave—
(a)
at least 3 consecutive days of leave taken before the non-working day
15
or series of non-working days in question, and
(b)
at least 3 consecutive days of leave taken after the non-working day
or series of non-working days in question.
      (6)
A “non-working day” is any day of the week, month or year on which P—
(a)
is not normally expected to work (according to P’s contract of
20
employment or usual pattern of work), and
(b)
does not in fact work.
      (7)
In calculating the reductions to be made under sub-paragraph (2)—
(a)
if it turns out, after applying sub-paragraph (3), that the reasonable
amounts of annual leave or parenting leave or, as the case may be,
25
the absences from work on sick leave do not add up (across the
period) to a whole number of days, the number in that case is to be
rounded down to the nearest whole number, but
(b)
any such rounding is to be ignored for the purposes of sub-
paragraph (2)(c).
30
      (8)
If—
(a)
P changes employment during the given period,
(b)
there is a gap between the two employments, and
(c)
P does not work at all at any time between the two employments,

the number of days in the given period may be reduced by the number of
35
days in that gap.
      (9)
But—
(a)
if the gap lasts for more than 15 days, only 15 days may be
subtracted, and
(b)
if there is more than one change of employment during the period,
40
the maximum number of days that may be subtracted under sub-
paragraph (8) for all the gaps in total is 30.
Significant breaks from UK or overseas work
29    (1)
There is a “significant break from UK work” if at least 31 days go by and not
one of those days is—
45
(a)
a day on which P does more than 3 hours’ work in the UK, or

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
506

(b)
a day on which P would have done more than 3 hours’ work in the
UK but for being on annual leave, sick leave or parenting leave.
      (2)
There is a “significant break from overseas work” if at least 31 days go by
and not one of those days is—
(a)
a day on which P does more than 3 hours’ work overseas, or
5
(b)
a day on which P would have done more than 3 hours’ work
overseas but for being on annual leave, sick leave or parenting leave.
Relevant jobs on board vehicles, aircraft or ships
30    (1)
P has a “relevant” job on board a vehicle, aircraft or ship if condition A and
condition B are met.
10
      (2)
Condition A is that P either—
(a)
holds an employment, the duties of which consist of duties to be
performed on board a vehicle, aircraft or ship while it is travelling, or
(b)
carries on a trade, the activities of which consist of work to be done
or services to be provided on board a vehicle, aircraft or ship while it
15
is travelling.
      (3)
Condition B is that substantially all of the trips made in performing those
duties or carrying on those activities are ones that involve crossing an
international boundary at sea, in the air or on land (referred to as “cross-
border trips”).
20
      (4)
Sub-paragraph (2)(b) is not satisfied unless, in order to do the work or
provide the services, P has to be present (in person) on board the vehicle,
aircraft or ship while it is travelling.
      (5)
Duties or activities of a purely incidental nature are to be ignored in deciding
whether the duties of an employment or the activities of a trade consist of
25
duties or activities of a kind described in sub-paragraph (2)(a) or (b).
UK ties
31    (1)
What counts as a “UK tie” depends on whether P was resident in the UK for
one or more of the 3 tax years preceding year X.
      (2)
If P was resident in the UK for one or more of those 3 tax years, each of the
30
following types of tie counts as a UK tie—
(a)
a family tie,
(b)
an accommodation tie,
(c)
a work tie,
(d)
a 90-day tie, and
35
(e)
a country tie.
      (3)
Otherwise, each of the following types of tie counts as a UK tie—
(a)
a family tie,
(b)
an accommodation tie,
(c)
a work tie, and
40
(d)
a 90-day tie.
      (4)
In order to have the requisite number of UK ties for year X, each tie of P’s
must be of a different type.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
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Family tie
32    (1)
P has a family tie for year X if—
(a)
in year X, a relevant relationship exists at any time between P and
another person, and
(b)
that other person is someone who is resident in the UK for year X.
5
      (2)
A relevant relationship exists at any time between P and another person if at
the time—
(a)
P and the other person are husband and wife or civil partners and, in
either case, are not separated,
(b)
P and the other person are living together as husband and wife or, if
10
they are of the same sex, as if they were civil partners, or
(c)
the other person is a child of P’s and is under the age of 18.
      (3)
P does not have a family tie for year X by virtue of sub-paragraph (2)(c) if P
sees the child in the UK on fewer than 61 days (in total) in—
(a)
year X, or
15
(b)
if the child turns 18 during year X, the part of year X before the day
on which the child turns 18.
      (4)
A day counts as a day on which P sees the child if P sees the child in person
for all or part of the day.
      (5)
“Separated” means separated—
20
(a)
under an order of a court of competent jurisdiction,
(b)
by deed of separation, or
(c)
in circumstances where the separation is likely to be permanent.
33    (1)
This paragraph applies in deciding for the purposes (only) of paragraph
32(1)(b) whether a person with whom P has a relevant relationship (a
25
“family member”) is someone who is resident in the UK for year X.
      (2)
A family tie based on the fact that a family member has, by the same token,
a relevant relationship with P is to be disregarded in deciding whether that
family member is someone who is resident in the UK for year X.
      (3)
A family member falling within sub-paragraph (4) is to be treated as being
30
not resident in the UK for year X if the number of days that he or she spends
in the UK in the part of year X outside term-time is less than 21.
      (4)
A family member falls within this sub-paragraph if he or she—
(a)
is a child of P’s who is under the age of 18,
(b)
is in full-time education in the UK at any time in year X, and
35
(c)
is resident in the UK for year X but would not be so resident if the
time spent in full-time education in the UK in that year were
disregarded.
      (5)
In sub-paragraph (4)—
(a)
references to full-time education in the UK are to full-time education
40
at a university, college, school or other educational establishment in
the UK, and
(b)
the reference to the time spent in full-time education in the UK is to
the time spent there during term-time.