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International Services, Residency and Domicile

Statutory Residence Test flowchart

Statutory Residence Test flowchart
Sonal Shah

By Sonal Shah

18 Aug 2022

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

What is the Statutory Residence Test?

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 is 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.

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 UK resident based on their ‘ties’.

If you are unsure of your residence status, we’ve created a statutory residence test 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 non-UK resident or automatically UK resident; and 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.

How split years are treated

An individual is, generally speaking, either UK resident for a whole tax year or not. However, where an individual arrives in or leaves the UK part way 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

Although the SRT can provide a clear and concise answer on UK residency, there are many terms within the various tests that are specifically defined and therefore each individual should consider the detailed rules in light of their specific circumstances and ensure that they take appropriate professional advice.

Please feel free to download the chart and use that as a starting point. Please contact the International Tax team for detailed advice.

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