Finance Bill

Session 2013 - 14
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
494

SSCB(NI)A 1992 (general provisions as to disqualification
and suspension).
Disability living allowance
4
A person is to be treated as a disabled person under paragraph 1(c)
if he or she satisfies HMRC that if he or she were to meet the
5
prescribed conditions as to residence and presence under section
71(6) of SSCBA 1992 or section 71(6) of SSCB(NI)A 1992 he or she
would be entitled to receive a disability living allowance by virtue
of entitlement to the care component at the highest or middle rate.
5
A person who is (or is treated as) a disabled person under
10
paragraph 1(c) is not to cease to be (or to be treated as) such a
disabled person by reason only of—
(a)
provision made by regulations under section 72(8) of
SSCBA 1992 or section 72(8) of SSCB(NI)A 1992 (no
payment of disability allowance for persons for whom
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certain accommodation is provided), or
(b)
section 113(1) of SSCBA 1992 or section 113(1) of
SSCB(NI)A 1992 or provision made by regulations under
section 113(2) of SSCBA 1992 or section 113(2) of
SSCB(NI)A 1992 (general provisions as to disqualification
20
and suspension).
Personal independence payment
6
A person is to be treated as a disabled person under paragraph
1(d) if he or she satisfies HMRC that if he or she were to meet the
prescribed conditions as to residence and presence under section
25
77(3) of WRA 2012 or the corresponding provision having effect in
Northern Ireland he or she would be entitled to receive personal
independence payment entitlement by virtue of entitlement to the
daily living component.
7
A person who is (or is treated as) a disabled person under
30
paragraph 1(d) is not to cease to be (or to be treated as) such a
disabled person by reason only of—
(a)
provision made by regulations under section 85 of WRA
2012 (exclusion of certain care home residents) or the
corresponding provision having effect in Northern
35
Ireland,
(b)
provision made by regulations under section 86 of WRA
2012 (exclusion of certain hospital in-patients) or the
corresponding provision having effect in Northern
Ireland, or
40
(c)
section 87 of WRA 2012 (exclusion of prisoners and
detainees) or the corresponding provision having effect in
Northern Ireland.
Interpretation
8
In this Schedule—
45
“armed forces independence payment” means armed forces
independence payment under a scheme established under

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
495

section 1 of the Armed Forces (Pensions and
Compensation) Act 2004,
“attendance allowance” means an allowance under section 64
of the SSCBA 1992 or section 64 of the SSCB(NI)A 1992,
“constant attendance allowance” means an allowance under
5
article 8 of the Naval, Military and Air Forces etc.
(Disablement and Death) Service Pensions Order 2006 (S.I.
2006/606),
“disability living allowance” means a disability living
allowance under section 71 of the SSCBA 1992 or section 71
10
of the SSCB(NI)A 1992,
“HMRC” means Her Majesty’s Revenue and Customs,
“personal independence payment” means personal
independence payment under—
(a)
WRA 2012, or
15
(b)
the corresponding provision having effect in
Northern Ireland,
“SSCBA 1992” means the Social Security Contributions and
Benefits Act 1992,
“SSCB(NI)A 1992” means the Social Security Contributions
20
and Benefits (Northern Ireland) Act 1992,
“WRA 2012” means the Welfare Reform Act 2012.”
Interpretation: relevant settlement
19
In this Schedule, “relevant settlement” means—
(a)
a settlement created before 8 April 2013 the trusts of which have not
25
been altered on or after that date, or
(b)
a settlement arising after 8 April 2013 under a will executed before
that date which has not been altered on or after that date.
Schedule 43
Section 215

Statutory residence test
30
Part 1
The rules
Introduction
1     (1)
This Part of this Schedule sets out the rules for determining for the purposes
of relevant tax whether individuals are resident or not resident in the UK.
35
      (2)
The rules are referred to collectively as “the statutory residence test”.
      (3)
The rules do not apply in determining for the purposes of relevant tax
whether individuals are resident or not resident in England, Wales, Scotland
or Northern Ireland specifically (rather than in the UK as a whole).
      (4)
“Relevant tax” means—
40
(a)
income tax,

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
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(b)
capital gains tax, and
(c)
(so far as the residence status of individuals is relevant to them)
inheritance tax and corporation tax.
      (5)
Key concepts used in the rules are defined in Part 2 of this Schedule.
Interpretation of enactments
5
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)
Sub-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
10
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
of any enactment relating to relevant tax to be resident (or not resident) there
at all times in that tax year.
15
      (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
(or falling to be recognised and acknowledged in law by virtue of) any
enactment.
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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)
the 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
25
year.
The automatic residence test
5
The automatic residence test is met for year X if P meets—
(a)
at least one of the automatic UK tests, and
(b)
none of the automatic overseas tests.
30
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
X.
8     (1)
The second automatic UK test is that—
35
(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
(c)
there is at least one period of 91 (consecutive) days in respect of
which the following conditions are met—
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Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
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(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)
throughout 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.
5
      (3)
Condition B is that—
(a)
P has one or more homes overseas, but
(b)
each 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”
10
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)
In 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
15
how short a time).
      (6)
In sub-paragraphs (4) and (5)—
(a)
a 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
20
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
buying 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
25
conditions are in fact met for longer than that.
      (8)
If P has more than one home in the UK—
(a)
each 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
30
relation to at least one of those homes.
9     (1)
The third automatic UK test is that—
(a)
P 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,
35
(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
which 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’
40
work in the UK.
      (2)
Take the following steps to work out, for any given period of 365 days,
whether P works “sufficient hours in the UK” as assessed over that period—

Step 1

Identify any days in the period on which P does more than 3 hours’ work
45
overseas, including ones on which P also does work in the UK on the same
day.

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
498


The 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.
5

The 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
10
rules 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
15
whole 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.

20

If the answer is 35 or more, P is considered to work “sufficient hours in the
UK” as assessed over the 365-day period in question.
      (3)
This paragraph does not apply to P if—
(a)
P has a relevant job on board a vehicle, aircraft or ship at any time in
year X, and
25
(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
The fourth automatic UK test is that—
(a)
P dies in year X,
30
(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
preceding year X would not be a split year as respects P (see Part 3 of
this Schedule), and
35
(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
UK.
The automatic overseas tests
40
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
year X,
(b)
the number of days in year X that P spends in the UK is less than 16,
45
and
(c)
P does not die in year X.

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
499

13
The second automatic overseas test is that—
(a)
P 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—
5
(a)
P works sufficient hours overseas, as assessed over year X,
(b)
during 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
10
than 91.
      (2)
A 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.
15
      (3)
Take the following steps to work out whether P works “sufficient hours
overseas” 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.
20

The 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 overseas in year X, but ignoring any hours
that P works overseas on disregarded days.
25

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

Step 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
30
rules 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
35
whole 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 overseas hours by the number resulting from step 4.

40

If the answer is 35 or more, P is considered to work “sufficient hours
overseas” as assessed over year X.
      (4)
This paragraph does not apply to P if—
(a)
P has a relevant job on board a vehicle, aircraft or ship at any time in
year X, and
45
(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.

Finance Bill
Schedule 43 — Statutory residence test
Part 1 — The rules
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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)
the number of days that P spends in the UK in year X is less than 46.
5
      (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
3 of this Schedule).
10
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
years or, alternatively, P’s case falls within sub-paragraph (2), and
15
(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
because P met the third automatic overseas test for that year, and
20
(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)
in sub-paragraph (1)(a) and (b) and sub-paragraph (3), for “year X”
25
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
year X up to and including the day before the day of P’s death”.
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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)
P has sufficient UK ties for that year.
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      (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)
the number of days that P spends in the UK in year X.
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      (4)
The Tables in paragraphs 18 and 19 show how many ties are sufficient in
each case.