Draft Finance Bill 2013: UK residence neither simple nor certain, says Ernst & Young
Patrick Stevens, tax partner at Ernst & Young comments on the draft legislation for the new Statutory Residence Test, which was released today:
“A ream of recent tax case law has resulted in mounting ambiguity and uncertainty about when someone would be deemed to be a UK resident, which will have undoubtedly discouraged some high net worth individuals from entering UK shores. A clear and unambiguous statutory test was urgently needed to help UK competitiveness.
“Under the new 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, such as whether they own property or have business interests here, or where their family are resident.
“Unfortunately, despite feedback from tax professionals and others, the new test fails to provide either simplicity or certainty, with the legislation running to nearly 80 pages and many significant terms undefined.
“For example, a crucial question for taxpayers in determining residence will be deciding whether they have a “home” in the UK. However, the legislation fails to provide a clear definition of a “home” – merely stating that it could include a vehicle (so presumably sleeping in one’s car could count) and that “it will depend on all the circumstances of the case”. This leaves taxpayers trying to decide if they have enough of a connection with a property to decide if it is their home.
“With a lack of clear definitions, tax cases in this area will continue to grow. The new rules will be a help, but a number of uncertainties will remain, making many high net worth individuals reluctant to come to the UK or otherwise build connections here.”