Statutory Residence Test flowchart

The Statutory Residence Test (SRT) determines an individual’s residence status for international tax purposes.

In this article, we share more information regarding the test and how this is used by HMRC. We cover:

• What is the Statutory Residence Test?
• Who does the Statutory Residence Test apply to?
• What are the automatic overseas tests, automatic UK tests and sufficient ties tests?
• Statutory Residence Test – exceptional circumstances
• How split years are treated
• Glossary

What is the Statutory Residence Test (SRT)?

The SRT is a set of HM Revenue and Customs tests used to determine whether an individual is resident in the UK or not. It is also used to determine how many days an individual can remain in the UK without becoming a UK resident. Each tax year is looked at separately.

It can provide individuals with welcome certainty in relation to their UK residence status, but it is important not to underestimate the complexities of the rules.

Who does the Statutory Residence Test apply to?

It can apply to anyone arriving in the UK, leaving the UK, living in the UK, or those that have recently left but return to the UK on a regular basis.

What are the automatic overseas tests, automatic UK tests and sufficient ties tests?

On a high level, the SRT is relatively straightforward. It is based on three definitive tests, the automatic overseas tests, the automatic UK tests, and the sufficient ties tests, and, although each of the tests are based on distinct criteria, the key component in each is the counting of the number of days during which an individual is present in the UK.

As advisers, we look at the automatic overseas tests first. These are used to determine whether a person is automatically resident overseas. If none of the conditions are met, we look at the automatic UK tests. These are used to determine whether a person is automatically resident in the UK. If none of those conditions are met, we finally turn to the sufficient ties tests. The sufficient ties tests determine whether an individual is resident in the UK subject to the number of ‘ties’ they have. It can also be used to determine how many days an individual can spend in the UK without becoming a UK resident based on their ‘ties’.

Statutory Residence Test – exceptional circumstances

Determining residency is largely dependent on the number of days spent in the UK along with connecting ties to the UK.

However, days spent in the UK may be ignored if the individual’s presence in the UK is due to exceptional circumstances beyond their control. This will usually only apply to events that occur while an individual is in the UK and which prevent them from leaving the UK.

Exceptional circumstances will normally apply where the individual has no choice concerning the time they spend in the UK, or in coming back to the UK and subject to the circumstances an individual can disregard up to 60 days spent in the UK when looking at their residency position for a particular tax year.

How split years are treated

An individual is, generally speaking, either a UK resident for a whole tax year or not. However, where an individual arrives in or leaves the UK partway through a tax year, split-year treatment may apply.

Split-year treatment allows an individual to ‘split’ their tax year into a non-UK resident portion and a UK resident portion which can then determine their UK tax obligations.

Conclusion

If you are unsure of your residence status, we’ve created an SRT flowchart to help navigate the complexities. The flowchart provides guidance and questions for you to answer to give you an indication of your residence status. It asks a series of questions that will easily identify if you are automatically a non-UK resident or automatically a UK resident.

Finally, it looks at the sufficient ties test which requires you to consider the number of ties you have with the UK which then concludes your residency status. Please contact the International Tax team for detailed advice.

Glossary

Days Spent

An individual is considered to spend a day in the UK for SRT purposes if they are in the UK at the end of the day. However, if the day is a transit day, with no work or if the person is in the UK due to exceptional circumstances beyond their control (for no more than 60 days), it doesn’t count as a day spent in the UK. In some cases, a person might be considered to spend a day in the UK even if they’re not physically there at the end of the day.

Working full-time overseas (WFTO)

To qualify as working full-time overseas, the individual must work an average of 35 hours a week abroad (excluding certain defined days), with no long breaks from overseas work.

They must also spend fewer than 91 days in the UK and work in the UK for fewer than 31 days, with at least three hours of work per day.

All Homes are in the UK

An individual is considered a UK resident if they have a home in the UK for more than 90 days and are present there on at least 30 different days in the tax year. Additionally, for 91 consecutive days, at least 30 of which are in the tax year, the individual must not have a home overseas where they are present for 30 or more days. If they have more than one home in the UK, this test applies to at least one of them.

Works Sufficient Hours in the UK (WSHUK)

An individual must work at least 35 hours a week in the UK over a 365-day period (excluding certain days). 75% or more, of the days worked (over three hours), must be in the UK, and the individual must work for more than three hours in the UK on at least one day during the current tax year.

Workdays

A workday in the UK for SRT purposes is any day where more than three hours of work is done. This includes both incidental and main duties, as well as most travel. There are specific rules to determine if an individual works enough hours in the UK or overseas for the WFTO or WSHUK tests. While the difference between incidental and main duties isn’t important for the SRT, it still matters for calculating an employee’s tax liability.

Exceptional Circumstances

This refers to circumstances where an individual’s presence in the UK is significantly influenced by unforeseen and uncontrollable events, such as serious illness or natural disasters, that prevent them from leaving the country. This was also seen during the Covid-19 pandemic when travel was limited due to national lockdowns.

UK Resident Family

A family tie exists if a person’s spouse, civil partner, or minor child is UK resident in the relevant tax year. This also includes someone living with the individual as a partner (either married or civil partnership). A minor child in full-time education in the UK won’t count as a family tie unless they spend more than 20 days in the UK outside of term time.