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 2 — Key concepts
508

      (6)
For the purposes of this paragraph, half-term breaks and other breaks when
teaching is not provided during a term are considered to form part of “term-
time”.
Accommodation tie
34    (1)
P has an accommodation tie for year X if—
5
(a)
P has a place to live in the UK,
(b)
that place is available to P during year X for a continuous period of
at least 91 days, and
(c)
P spends at least one night at that place in that year.
      (2)
If there is a gap of fewer than 16 days between periods in year X when a
10
particular place is available to P, that place is to be treated as continuing to
be available to P during the gap.
      (3)
P is considered to have a “place to live” in the UK if—
(a)
P’s home or at least one of P’s homes (if P has more than one) is in
the UK, or
15
(b)
P has a holiday home or temporary retreat (or something similar) in
the UK, or
(c)
accommodation is otherwise available to P where P can live when P
is in the UK.
      (4)
Accommodation may be “available” to P even if P holds no estate or interest
20
in it and even has no legal right to occupy it.
      (5)
If the accommodation is the home of a close relative of P’s, sub-paragraph
(1)(c) has effect as if for “at least one night” there were substituted “a total of
at least 16 nights”.
      (6)
A “close relative” is—
25
(a)
a parent or grandparent,
(b)
a brother or sister,
(c)
a child aged 18 or over, or
(d)
a grandchild aged 18 or over,

in each case, including by half-blood or by marriage or civil partnership.
30
Work tie
35    (1)
P has a work tie for year X if P works in the UK for at least 40 days (whether
continuously or intermittently) in year X.
      (2)
For these purposes, P works in the UK for a day if P does more than 3 hours’
work in the UK on that day.
35
36    (1)
This paragraph applies for the purposes of paragraph 35.
      (2)
It applies in cases where P has a relevant job on board a vehicle, aircraft or
ship.
      (3)
When making a cross-border trip as part of that job—
(a)
if the trip begins in the UK, P is assumed to do more than 3 hours’
40
work in the UK on the day on which it begins,
(b)
if the trip ends in the UK, P is assumed to do fewer than 3 hours’
work in the UK on the day on which it ends.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
509

      (4)
Those assumptions apply regardless of how late in the day the trip begins or
ends (even if it begins or ends just before midnight).
      (5)
For the purposes of sub-paragraph (3)(a), it does not matter whether the trip
ends on that same day.
      (6)
A day that falls within both paragraph (a) and paragraph (b) of sub-
5
paragraph (3) is to be treated as if it fell only within paragraph (a).
      (7)
In the case of a cross-border trip to or from the UK that is undertaken in
stages—
(a)
the day on which the trip begins or, as the case may be, ends is the
day on which the stage of the trip that involves crossing the UK
10
border begins or ends, and
(b)
accordingly, any day on which a stage is undertaken by P solely
within the UK must (if it lasts for more than 3 hours) be counted
separately as a day on which P does more than 3 hours’ work in the
UK.
15
90-day tie
37
P has a 90-day tie for year X if P has spent more than 90 days in the UK in—
(a)
the tax year preceding year X,
(b)
the tax year preceding that tax year, or
(c)
each of those tax years separately.
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Country tie
38    (1)
P has a country tie for year X if the country in which P meets the midnight
test for the greatest number of days in year X is the UK.
      (2)
If—
(a)
P meets the midnight test for the same number of days in year X in
25
two or more countries, and
(b)
that number is the greatest number of days for which P meets the
midnight test in any country in year X,

P has a country tie for year X if one of those countries is the UK.
      (3)
P meets the “midnight test” in a country for a day if P is present in that
30
country at the end of that day.
Part 3
Split year treatment
Introduction
39
This Part of this Schedule—
35
(a)
explains when, as respects an individual, a tax year is a split year,
(b)
defines the overseas part and the UK part of a split year, and
(c)
amends certain enactments to provide for special charging rules in
cases involving split years.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
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40    (1)
The effect of a tax year being a split year is to relax the effect of paragraph
2(3) (which treats individuals who are UK resident “for” a tax year as being
UK resident at all times in that year).
      (2)
When and how the effect of paragraph 2(3) is relaxed is defined in the special
charging rules introduced by the amendments made by this Part.
5
      (3)
Subject to those special charging rules (and any other special charging rules
for split years that may be introduced in the future), nothing in this Part
alters an individual’s residence status for a tax year or affects his or her
liability to tax.
41
This Part—
10
(a)
does not apply in determining the residence status of personal
representatives, and
(b)
applies to only a limited extent in determining the residence status of
the trustees of a settlement (see section 475 of ITA 2007 and section
69 of TCGA 1992, as amended by this Part).
15
42
The existence of special charging rules for cases involving split years is not
intended to affect any question as to whether an individual would fall to be
regarded under double taxation arrangements as a resident of the UK.
Definition of a “split year”
43    (1)
As respects an individual, a tax year is a “split year” if—
20
(a)
the individual is resident in the UK for that year, and
(b)
the circumstances of the case fall within—
(i)
Case 1, Case 2 or Case 3 (cases involving actual or deemed
departure from the UK), or
(ii)
Case 4, Case 5, Case 6, Case 7 or Case 8 (cases involving actual
25
or deemed arrival in the UK).
      (2)
The 8 Cases are described in paragraphs 44 to 51.
      (3)
In those paragraphs, the individual is referred to as “the taxpayer” and the
tax year as “the relevant year”.
      (4)
In applying Part 2 of this Schedule to those paragraphs, for “P” read “the
30
taxpayer”.
Case 1
44    (1)
The circumstances of a case fall within Case 1 if they are as described in sub-
paragraphs (2) to (4).
      (2)
The taxpayer was resident in the UK for the previous tax year (whether or
35
not it was a split year).
      (3)
There is at least one period (consisting of one or more days) that—
(a)
begins with a day that—
(i)
falls within the relevant year, and
(ii)
is a day on which the taxpayer does more than 3 hours’ work
40
overseas,
(b)
ends with the last day of the relevant year, and
(c)
satisfies the overseas work criteria.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
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      (4)
The taxpayer is not resident in the UK for the next tax year because the
taxpayer meets the third automatic overseas test for that year (see paragraph
14).
      (5)
A period “satisfies the overseas work criteria” if—
(a)
the taxpayer works sufficient hours overseas, as assessed over that
5
period,
(b)
during that period, there are no significant breaks from overseas
work,
(c)
the number of days in that period on which the taxpayer does more
than 3 hours’ work in the UK does not exceed the permitted limit,
10
and
(d)
the number of days in that period falling within sub-paragraph (6)
does not exceed the permitted limit.
      (6)
A day falls within this sub-paragraph if—
(a)
it is a day spent by the taxpayer in the UK, but
15
(b)
it is not a day that is treated under paragraph 23(4) as a day spent by
the taxpayer in the UK.
      (7)
To work out whether the taxpayer works “sufficient hours overseas” as
assessed over a given period, apply paragraph 14(3) but with the following
modifications—
20
(a)
for “P” read “the taxpayer”,
(b)
for “year X” read “the period under consideration”,
(c)
for “365 (or 366 if year X includes 29 February)” read “the number of
days in the period under consideration”, and
(d)
in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30”
25
read “the permitted limit”.
      (8)
The permitted limit is—
(a)
for sub-paragraphs (5)(c) and (7)(d), the number found by reducing
30 by the appropriate number, and
(b)
for sub-paragraph (5)(d), the number found by reducing 90 by the
30
appropriate number.
      (9)
The appropriate number is the result of—

where—
  “A” is—
(a)
30, for sub-paragraphs (5)(c) and (7)(d), or
35
(b)
90, for sub-paragraph (5)(d), and
“B” is the number of whole months in the part of the relevant year
before the day mentioned in sub-paragraph (3)(a).
Case 2
45    (1)
The circumstances of a case fall within Case 2 if they are as described in sub-
40
paragraphs (2) to (6).
      (2)
The taxpayer was resident in the UK for the previous tax year (whether or
not it was a split year).

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
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      (3)
The taxpayer has a partner whose circumstances fall within Case 1 for—
(a)
the relevant year, or
(b)
the previous tax year.
      (4)
On a day in the relevant year, the taxpayer moves overseas so the taxpayer
and the partner can continue to live together while the partner is working
5
overseas.
      (5)
In the part of the relevant year beginning with the deemed departure day—
(a)
the taxpayer has no home in the UK at any time, or has homes in both
the UK and overseas but spends the greater part of the time living in
the overseas home, and
10
(b)
the number of days that the taxpayer spends in the UK does not
exceed the permitted limit.
      (6)
The taxpayer is not resident in the UK for the next tax year.
      (7)
If sub-paragraph (3)(a) applies, the “deemed departure day” is the later of—
(a)
the day mentioned in sub-paragraph (4), and
15
(b)
the first day of what is, for the partner, the overseas part of the
relevant year as defined for Case 1 (see paragraph 53).
      (8)
If sub-paragraph (3)(b) applies, the “deemed departure day” is the day
mentioned in sub-paragraph (4).
      (9)
The permitted limit is the number found by reducing 90 by the appropriate
20
number.
     (10)
The appropriate number is the result of—

where—
  “A” is 90, and
“B” is the number of whole months in the part of the relevant year
25
before the deemed departure day.
Case 3
46    (1)
The circumstances of a case fall within Case 3 if they are as described in sub-
paragraphs (2) to (6).
      (2)
The taxpayer was resident in the UK for the previous tax year (whether or
30
not it was a split year).
      (3)
At the start of the relevant year the taxpayer had one or more homes in the
UK but—
(a)
there comes a day in the relevant year when P ceases to have any
home in the UK, and
35
(b)
from then on, P has no home in the UK for the rest of that year.
      (4)
In the part of the relevant year beginning with the day mentioned in sub-
paragraph (3)(a), the taxpayer spends fewer than 16 days in the UK.
      (5)
The taxpayer is not resident in the UK for the next tax year.

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
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      (6)
At the end of the period of 6 months beginning with the day mentioned in
sub-paragraph (3)(a), the taxpayer has a sufficient link with a country
overseas.
      (7)
The taxpayer has a “sufficient link” with a country overseas if and only if—
(a)
the taxpayer is considered for tax purposes to be a resident of that
5
country in accordance with its domestic laws, or
(b)
the taxpayer has been present in that country (in person) at the end
of each day of the 6-month period mentioned in sub-paragraph (6),
or
(c)
the taxpayer’s only home is in that country or, if the taxpayer has
10
more than one home, they are all in that country.
Case 4
47    (1)
The circumstances of a case fall within Case 4 if they are as described in sub-
paragraphs (2) to (4).
      (2)
The taxpayer was not resident in the UK for the previous tax year.
15
      (3)
At the start of the relevant year, the taxpayer did not meet the only home
test, but there comes a day in the relevant year when that ceases to be the
case and the taxpayer then continues to meet the only home test for the rest
of that year.
      (4)
For the part of the relevant year before that day, the taxpayer does not have
20
sufficient UK ties.
      (5)
The “only home test” is met if—
(a)
the taxpayer has only one home and that home is in the UK, or
(b)
the taxpayer has more than one home and all of them are in the UK.
      (6)
Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those
25
paragraphs) apply for the purposes of sub-paragraph (4) with the following
adjustments—
(a)
references in those paragraphs and that Part to year X are to be read
as references to the part of the relevant year mentioned in sub-
paragraph (4), and
30
(b)
each number of days mentioned in the first column of the Table in
paragraphs 18 and 19 is to be reduced by the appropriate number.
      (7)
The appropriate number is found by multiplying the number of days, in
each case, by—

where “A” is the number of whole months in the part of the relevant year
35
beginning with the day mentioned in sub-paragraph (3).
      (8)
Sub-paragraph (6)(a) does not apply to the references to year X in
paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence
status of family members) so those references must continue to be read as
references to year X.
40

Finance (No. 2) Bill
Schedule 43 — Statutory residence test
Part 3 — Split year treatment
514

Case 5
48    (1)
The circumstances of a case fall within Case 5 if they are as described in sub-
paragraphs (2) and (3).
      (2)
The taxpayer was not resident in the UK for the previous tax year.
      (3)
There is at least one period of 365 days in respect of which the following
5
conditions are met—
(a)
the period begins with a day that—
(i)
falls within the relevant year, and
(ii)
is a day on which the taxpayer does more than 3 hours’ work
in the UK,
10
(b)
in the part of the relevant year before the period begins, the taxpayer
does not have sufficient UK ties,
(c)
the taxpayer works sufficient hours in the UK, as assessed over the
period,
(d)
during the period, there are no significant breaks from UK work, and
15
(e)
at least 75% of the total number of days in the period on which the
taxpayer does more than 3 hours’ work are days on which the
taxpayer does more than 3 hours’ work in the UK.
      (4)
To work out whether the taxpayer works “sufficient hours in the UK” as
assessed over a given period, apply paragraph 9(2) but for “P” read “the
20
taxpayer”.
      (5)
Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those
paragraphs) apply for the purposes of sub-paragraph (3)(b) with the
following adjustments—
(a)
references in those paragraphs and that Part to year X are to be read
25
as references to the part of the relevant year mentioned in sub-
paragraph (3)(b), and
(b)
each number of days mentioned in the first column of the Table in
paragraphs 18 and 19 is to be reduced by the appropriate number.
      (6)
The appropriate number is found by multiplying the number of days, in
30
each case, by—

where “A” is the number of whole months in the part of the relevant year
beginning with the day on which the 365-day period in question begins.
      (7)
Sub-paragraph (5)(a) does not apply to the references to year X in
paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence
35
status of family members) so those references must continue to be read as
references to year X.
Case 6
49    (1)
The circumstances of a case fall within Case 6 if they are as described in sub-
paragraphs (2) to (4).
40
      (2)
The taxpayer was not resident in the UK for the previous tax year because
the taxpayer met the third automatic overseas test for that year (see
paragraph 14).