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Finance (No. 2) BillPage 490

(a) income tax,

(b) capital gains tax, and

(c) (so far as the residence status of individuals is relevant to them)
inheritance tax and corporation tax.

(5) 5Key concepts used in the rules are defined in Part 2 of this Schedule.

Interpretation of enactments

2 (1) In enactments relating to relevant tax, a reference to being resident (or not
resident) in the UK is, in the case of individuals, a reference to being resident
(or not resident) in the UK in accordance with the statutory residence test.

(2) 10Sub-paragraph (1) applies even if the reference relates to the tax liability of
an actual or deemed person that is not an individual (for example, where the
liability of another person depends on the residence status of an individual).

(3) An individual who, in accordance with the statutory residence test, is
resident (or not resident) in the UK “for” a tax year is taken for the purposes
15of any enactment relating to relevant tax to be resident (or not resident) there
at all times in that tax year.

(4) But see Part 3 of this Schedule (split year treatment) for cases where the effect
of sub-paragraph (3) is relaxed in certain circumstances.

(5) This Schedule has effect subject to any express provision to the contrary in
20(or falling to be recognised and acknowledged in law by virtue of) any
enactment.

The basic rule

3 An individual (“P”) is resident in the UK for a tax year (“year X”) if—

(a) the automatic residence test is met for that year, or

(b) 25the sufficient ties test is met for that year.

4 If neither of those tests is met for that year, P is not resident in the UK for that
year.

The automatic residence test

5 The automatic residence test is met for year X if P meets—

(a) 30at least one of the automatic UK tests, and

(b) none of the automatic overseas tests.

The automatic UK tests

6 There are 4 automatic UK tests.

7 The first automatic UK test is that P spends at least 183 days in the UK in year
35X.

8 (1) The second automatic UK test is that—

(a) P has a home in the UK during all or part of year X,

(b) that home is one where P spends a sufficient amount of time in year
X, and

Finance (No. 2) BillPage 491

(c) there is at least one period of 91 (consecutive) days in respect of
which the following conditions are met—

(i) the 91-day period in question occurs while P has that home,

(ii) at least 30 days of that 91-day period fall within year X, and

(iii) 5throughout that 91-day period, condition A or condition B is
met or a combination of those conditions is met.

(2) Condition A is that P has no home overseas.

(3) Condition B is that—

(a) P has one or more homes overseas, but

(b) 10each of those homes is a home where P spends no more than a
permitted amount of time in year X.

(4) In relation to a home of P’s in the UK, P “spends a sufficient amount of time”
there in year X if there are at least 30 days in year X when P is present there
on that day for at least some of the time (no matter how short a time).

(5) 15In relation to a home of P’s overseas, P “spends no more than a permitted
amount of time” there in year X if there are fewer than 30 days in year X
when P is present there on that day for at least some of the time (no matter
how short a time).

(6) In sub-paragraphs (4) and (5)—

(a) 20a reference to 30 days is to 30 days in aggregate, whether the days are
consecutive or intermittent, and

(b) a reference to P being present at the home is to P being present there
at a time when it is a home of P’s (so presence there on any other
occasion, for example to look round the property with a view to
25buying it, is to be disregarded).

(7) Sub-paragraph (1)(c) is satisfied so long as there is a period of 91 days in
respect of which the conditions described there are met, even if those
conditions are in fact met for longer than that.

(8) If P has more than one home in the UK

(a) 30each of those homes must be looked at separately to see if the second
automatic UK test is met, and

(b) the second automatic UK test is then met so long as it is met in
relation to at least one of those homes.

9 (1) The third automatic UK test is that—

(a) 35P works sufficient hours in the UK, as assessed over a period of 365
days,

(b) during that period, there are no significant breaks from UK work,

(c) all or part of that period falls within year X,

(d) more than 75% of the total number of days in the 365-day period on
40which P does more than 3 hours’ work are days on which P does
more than 3 hours’ work in the UK, and

(e) at least one day in year X is a day on which P does more than 3 hours’
work in the UK.

(2) Take the following steps to work out, for any given period of 365 days,
45whether P works “sufficient hours in the UK” as assessed over that period—

Step 1

Finance (No. 2) BillPage 492

Identify any days in the period on which P does more than 3 hours’ work
overseas, including ones on which P also does work in the UK on the same
day.

5The days so identified are referred to as “disregarded days”.

Step 2

Add up (for all employments held and trades carried on by P) the total
number of hours that P works in the UK during the period, but ignoring any
hours that P works in the UK on disregarded days.

10The result is referred to as P’s “net UK hours”.

Step 3

Subtract from 365—

(a) the total number of disregarded days, and

(b) any days that are allowed to be subtracted, in accordance with the
15rules in paragraph 28 of this Schedule, to take account of periods of
leave and gaps between employments.

The result is referred to as the “reference period”.

Step 4

Divide the reference period by 7. If the answer is more than 1 and is not a
20whole number, round down to the nearest whole number. If the answer is
less than 1, round up to 1.

Step 5

Divide P’s net UK hours by the number resulting from step 4.

(3) This paragraph does not apply to P if—

(a) 25P has a relevant job on board a vehicle, aircraft or ship at any time in
year X, and

(b) at least 6 of the trips that P makes in year X as part of that job are
cross-border trips that either begin in the UK, end in the UK or begin
and end in the UK.

10 30The fourth automatic UK test is that—

(a) P dies in year X,

(b) for each of the previous 3 tax years, P was resident in the UK by
virtue of meeting the automatic residence test,

(c) even assuming P were not resident in the UK for year X, the tax year
35preceding year X would not be a split year as respects P (see Part 3 of
this Schedule), and

(d) when P died, either—

(i) P’s home was in the UK, or

(ii) P had more than one home and at least one of them was in the
40UK.

The automatic overseas tests

11 There are 5 automatic overseas tests.

12 The first automatic overseas test is that—

(a) P was resident in the UK for one or more of the 3 tax years preceding
45year X,

Finance (No. 2) BillPage 493

(b) the number of days in year X that P spends in the UK is less than 16,
and

(c) P does not die in year X.

13 The second automatic overseas test is that—

(a) 5P was resident in the UK for none of the 3 tax years preceding year
X, and

(b) the number of days that P spends in the UK in year X is less than 46.

14 (1) The third automatic overseas test is that—

(a) P works sufficient hours overseas, as assessed over year X,

(b) 10during year X, there are no significant breaks from overseas work,

(c) the number of days in year X on which P does more than 3 hours’
work in the UK is less than 31, and

(d) the number of days in year X falling within sub-paragraph (2) is less
than 91.

(2) 15A day falls within this sub-paragraph if—

(a) it is a day spent by P in the UK, but

(b) it is not a day that is treated under paragraph 23(4) as a day spent by
P in the UK.

(3) Take the following steps to work out whether P works “sufficient hours
20overseas” as assessed over year X—

Step 1

Identify any days in year X on which P does more than 3 hours’ work in the
UK, including ones on which P also does work overseas on the same day.

The days so identified are referred to as “disregarded days”.

25Step 2

Add up (for all employments held and trades carried on by P) the total
number of hours that P works overseas in year X, but ignoring any hours
that P works overseas on disregarded days.

The result is referred to as P’s “net overseas hours”.

30Step 3

Subtract from 365 (or 366 if year X includes 29 February)—

(a) the total number of disregarded days, and

(b) any days that are allowed to be subtracted, in accordance with the
rules in paragraph 28 of this Schedule, to take account of periods of
35leave and gaps between employments.

The result is referred to as the “reference period”.

Step 4

Divide the reference period by 7. If the answer is more than 1 and is not a
whole number, round down to the nearest whole number. If the answer is
40less than 1, round up to 1.

Step 5

Divide P’s net overseas hours by the number resulting from step 4.

(4) This paragraph does not apply to P if—

Finance (No. 2) BillPage 494

(a) P has a relevant job on board a vehicle, aircraft or ship at any time in
year X, and

(b) at least 6 of the trips that P makes in year X as part of that job are
cross-border trips that either begin in the UK, end in the UK or begin
5and end in the UK.

15 (1) The fourth automatic overseas test is that—

(a) P dies in year X,

(b) P was resident in the UK for neither of the 2 tax years preceding year
X or, alternatively, P’s case falls within sub-paragraph (2), and

(c) 10the number of days that P spends in the UK in year X is less than 46.

(2) P’s case falls within this sub-paragraph if—

(a) P was not resident in the UK for the tax year preceding year X, and

(b) the tax year before that was a split year as respects P because the
circumstances of the case fell within Case 1, Case 2 or Case 3 (see Part
153 of this Schedule).

16 (1) The fifth automatic overseas test is that—

(a) P dies in year X,

(b) P was resident in the UK for neither of the 2 tax years preceding year
X because P met the third automatic overseas test for each of those
20years or, alternatively, P’s case falls within sub-paragraph (2), and

(c) P would meet the third automatic overseas test for year X if
paragraph 14 were read with the relevant modifications.

(2) P’s case falls within this sub-paragraph if—

(a) P was not resident in the UK for the tax year preceding year X
25because P met the third automatic overseas test for that year, and

(b) the tax year before that was a split year as respects P because the
circumstances of the case fell within Case 1 (see Part 3 of this
Schedule).

(3) The relevant modifications of paragraph 14 are—

(a) 30in sub-paragraph (1)(a) and (b) and sub-paragraph (3), for “year X”
read “the period from the start of year X up to and including the day
before the day of P’s death”, and

(b) in step 3 of sub-paragraph (3), for “365 (or 366 if year X includes 29
February)” read “the number of days in the period from the start of
35year X up to and including the day before the day of P’s death”.

The sufficient ties test

17 (1) The sufficient ties test is met for year X if—

(a) P meets none of the automatic UK tests and none of the automatic
overseas tests, but

(b) 40P has sufficient UK ties for that year.

(2) UK ties” is defined in Part 2 of this Schedule.

(3) Whether P has “sufficient” UK ties for year X will depend on—

(a) whether P was resident in the UK for any of the previous 3 tax years,
and

(b) 45the number of days that P spends in the UK in year X.

Finance (No. 2) BillPage 495

(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
5was resident in the UK for one or more of the 3 tax years preceding year X—

Days spent by P in the UK
in year X
Number of ties that are
sufficient
More than 15 but not
more than 45
At least 4
More than 45 but not
more than 90
10At least 3
More than 90 but not
more than 120
At least 2
More than 120 At least 1

19 15The 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
in year X
Number of ties that are
sufficient
More than 45 but not
more than 90
All 4
20
More than 90 but not
more than 120
At least 3
More than 120 At least 2

20 (1) If P dies in year X, paragraph 18 has effect as if the words “More than 15 but”
25were 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.

(3) The appropriate number is found by multiplying the number of days, in
30each case, by—


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

Finance (No. 2) BillPage 496

(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) 5otherwise, round it down to the nearest whole number.

Part 2 Key concepts

Introduction

21 This Part of this Schedule defines some key concepts for the purposes of this
10Schedule.

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) 15The first case is where—

(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) 20The second case is where—

(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) 25Examples of circumstances that may be “exceptional” are—

(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) 30the maximum number of days to which sub-paragraph (2) may
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
35same or different exceptional circumstances, will count as days spent
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) 40The deeming rule applies if—

(a) P has at least 3 UK ties for a tax year,

Finance (No. 2) BillPage 497

(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
5that tax year.

(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)
10(so, in deciding for those purposes whether P has a 90-day tie, qualifying
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
15period, whether continuously or intermittently.

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
20sufficient degree of permanence or stability about P’s arrangements there for
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
25of P’s.

(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
30(for example, if P is in the process of selling it or has let or sub-let it, having
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) 35in the performance of duties of an employment held by P, or

(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
40income in section 7 of ITEPA 2003.

(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) BillPage 498

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
5in calculating P’s earnings from that employment under section 337,
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) 10Time spent undertaking training counts as time spent working if—

(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
15deducted in calculating the profits of the trade for income tax
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
20is chargeable to income tax under ITEPA 2003 or ITTOIA 2005.

(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
25is held or the trade is carried on by P.

(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) 30begin when P boards the aircraft, ship or train that is bound for a
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,
35aircraft or ships.

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) 40The number of days in the given period may be reduced to take account of—

(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) BillPage 499

(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
5reduction is made under paragraph (a) or (b).

(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
10things)—

(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) 15at least 3 consecutive days of leave taken before the non-working day
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) 20is not normally expected to work (according to P’s contract of
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
25amounts of annual leave or parenting leave or, as the case may be,
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-
30paragraph (2)(c).

(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,

35the number of days in the given period may be reduced by the number of
days in that gap.

(9) But—

(a) if the gap lasts for more than 15 days, only 15 days may be
subtracted, and

(b) 40if there is more than one change of employment during the period,
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
45one of those days is—

(a) a day on which P does more than 3 hours’ work in the UK, or

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