Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
511

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),

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Schedule 43 — Statutory residence test
Part 2 — Key concepts
512

(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 Bill
Schedule 43 — Statutory residence test
Part 2 — Key concepts
513

(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.

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Schedule 43 — Statutory residence test
Part 2 — Key concepts
514

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.

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Schedule 43 — Statutory residence test
Part 2 — Key concepts
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      (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 if P 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.

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Schedule 43 — Statutory residence test
Part 3 — Split year treatment
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      (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.
20
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.

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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: starting full-time work overseas
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.