UK tax residence may be certain but it’s certainly not simple – EY comments on tax consultation, released today

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Carolyn Steppler, private client services tax partner at EY comments on the Statutory Residence consultation, released today:

“Confirmation that there will finally be a statutory test to determine UK tax residency will be greeted with a sigh of relief. Residence status is the most basic building block for determining an individual’s tax liability and so today’s announcement has significant implications for the UK’s competitiveness. A ream of recent tax cases has resulted in mounting ambiguity and uncertainty, which will have undoubtedly discouraged some high net worth individuals from entering UK shores.

“However, while the new test will provide certainty for many, it is unlikely that it will provide simplicity - the new legislation is 60 pages. Under the proposals, from 6 April next year, an individual’s residence will depend partly on the number of days spent in the UK, but also on their connections to the UK. This will take into account a whole range of factors.

“For example, individuals must also consider the residence of their family members. Do they have children who spend more than 20 days in the UK outside term time? Do they have available accommodation in the UK? Even using the same hotel once a week may have an impact on determining tax residency.”