Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 45 — Statutory residence test
Part 2 — Key concepts
524

      (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
5
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
10
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
15
(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
20
(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.
Family tie
32    (1)
P has a family tie for year X if—
25
(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.
      (2)
A relevant relationship exists at any time between P and another person if at
the time—
30
(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
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.
35
      (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
(b)
if the child turns 18 during year X, the part of year X before the day
on which the child turns 18.
40
      (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—

Finance Bill
Schedule 45 — Statutory residence test
Part 2 — Key concepts
525

(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
5
“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
10
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
15
(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
20
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.
      (6)
For the purposes of this paragraph, half-term breaks and other breaks when
25
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—
(a)
P has a place to live in the UK,
30
(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
particular place is available to P, that place is to be treated as continuing to
35
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
(b)
P has a holiday home or temporary retreat (or something similar) in
40
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
in it and even if P has no legal right to occupy it.
45

Finance Bill
Schedule 45 — Statutory residence test
Part 2 — Key concepts
526

      (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—
(a)
a parent or grandparent,
5
(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.
Work tie
10
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.
36    (1)
This paragraph applies for the purposes of paragraph 35.
15
      (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’
work in the UK on the day on which it begins,
20
(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.
      (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
25
ends on that same day.
      (6)
A day that falls within both paragraph (a) and paragraph (b) of sub-
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—
30
(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
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
35
separately as a day on which P does more than 3 hours’ work in the
UK.
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,
40
(b)
the tax year preceding that tax year, or
(c)
each of those tax years separately.

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
527

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
5
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
10
country at the end of that day.
Part 3
Split year treatment
Introduction
39
This Part of this Schedule—
15
(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.
40    (1)
The effect of a tax year being a split year is to relax the effect of paragraph
20
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.
      (3)
Subject to those special charging rules (and any other special charging rules
25
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—
(a)
does not apply in determining the residence status of personal
30
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).
42
The existence of special charging rules for cases involving split years is not
35
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—
(a)
the individual is resident in the UK for that year, and
40
(b)
the circumstances of the case fall within—

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
528

(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
or deemed arrival in the UK).
      (2)
The 8 Cases are described in paragraphs 44 to 51.
5
      (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
taxpayer”.
Case 1: starting full-time work overseas
10
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
not it was a split year).
      (3)
There is at least one period (consisting of one or more days) that—
15
(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
overseas,
(b)
ends with the last day of the relevant year, and
20
(c)
satisfies the overseas work criteria.
      (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—
25
(a)
the taxpayer works sufficient hours overseas, as assessed over that
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
30
than 3 hours’ work in the UK does not exceed the permitted limit,
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—
35
(a)
it is a day spent by the taxpayer in the UK, but
(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
40
modifications—
(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
45

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
529

(d)
in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30”
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
5
(b)
for sub-paragraph (5)(d), the number found by reducing 90 by the
appropriate number.
      (9)
The appropriate number is the result of—

where—
  “A” is—
10
(a)
30, for sub-paragraphs (5)(c) and (7)(d), or
(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: the partner of someone starting full-time work overseas
15
45    (1)
The circumstances of a case fall within Case 2 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
not it was a split year).
      (3)
The taxpayer has a partner whose circumstances fall within Case 1 for—
20
(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
overseas.
25
      (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
(b)
the number of days that the taxpayer spends in the UK does not
30
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
(b)
the first day of what is, for the partner, the overseas part of the
35
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
number.
40

Finance Bill
Schedule 45 — Statutory residence test
Part 3 — Split year treatment
530

     (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
before the deemed departure day.
5
Case 3: ceasing to have a home in the UK
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
not it was a split year).
10
      (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
(b)
from then on, P has no home in the UK for the rest of that year.
15
      (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.
      (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
20
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
country in accordance with its domestic laws, or
(b)
the taxpayer has been present in that country (in person) at the end
25
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
more than one home, they are all in that country.
Case 4: starting to have a home in the UK only
30
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.
      (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
35
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
sufficient UK ties.
      (5)
The “only home test” is met if—
40