Tax & Accounting News

Residence Rules Keep Travellers on their Toes

01/10/2008

The Finance Act 2008 contains the first statutory definition of what constitutes a day spent in the UK – a crucial factor in deciding if someone is resident in the UK for a tax year.

If they spend 183 days or more in a tax year in the UK, they will be resident here. The same definition, although not contained in the provision, will be used by HM Revenue & Customs to calculate if they have been in the UK for an average of more than 90 days in the UK, over a four-year rolling period. Doing so means they will be resident.

Previously, only whole days spent in the UK were counted towards establishing residence, and days of arrival and departure were generally ignored. Now nights spent in the UK count as a day of UK residence. For example, flying in from overseas at 9pm on a Monday and flying out again at 8pm on a Wednesday now counts as two days spent in the UK.

However, if you fly in to the UK but a delay means that you cannot fly out until the following day, whether you have spent a day in the UK is not so straightforward.

The law says the day will not count if: “…during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual’s passage through the UK”.

Effectively, this means that if you stay overnight in a nearby hotel and make use of your extra time in the UK by arranging to meet a business contact, you will be treated as having spent a day in the UK because the meeting is not substantially related to completing your travel.

However, if you were to bump into the same business contact at the airport and have a chat over a drink, because the meeting was unplanned, the day will not count as being spent in the UK because your activities in the UK are substantially related to completing your travel.

Broadly speaking, arranging to do something while you are in the UK means it will count as a day but if the activity happens by chance, it will not. The message to anyone travelling regularly to the UK is to be very careful, or they could find themselves spending 91 days in the UK, resulting in residency they had sought to avoid.