Making sense of the statutory residence test (“SRT”)

Andy Wood • April 22, 2024
A blurry picture of a city skyline at night.

A person’s residence status – for the purposes of this article whether they are resident for tax purposes in the UK – is incredibly important.

It determines what taxes are payable and the quantum of such payments.

With this in mind, one might be slightly surprised that it took until the 6 April 2013 for the legislators to enshrine a statutory test of residence. 

Prior to this, it was generally the piecemeal body of case law which determined someone’s status along with HMRC’s long standing

guidance set out in IR20.


Residence status – liability to taxes


But, why does it matter?


Residence is the main determining factor for exposure to income taxes and capital gains tax.


A table with a lot of text on it



Up to now, IHT is primarily concerned with one’s domicile position. However, as part of the surprising announcement in Spring Budget 2024 that significance of domicile will be removed from UK tax code, IHT will, in the future, be determined by residence.


An overview of the SRT


he SRT created a lot of criticism when introduced.

The rules can be quite complex. However, modern life can very complex. So, we shouldn’t be too surprised.

This contrasts with the case law (on which cases were being previously being determined) was decades, and in some cases centuries, old. Where, under this old case law international business involved time consuming and expensive journeys overseas, it is now exceedingly easy to travel to far flung countries.

What the SRT aims to do is set out are a number of objective tests. Even where the application of these test can be quite complex, If one, based on the facts, can fall the ‘right side of the line’ then one can plan with certainty that one is non-UK resident.

Where one can obtain certainty, then this must be an improvement on the old state of affairs.


The ‘SRT Roadmap’


General


he SRT can be thought of as a road map. However, it is a roadmap to a destination that nobody know at the outset.

The first stage is to determine whether one satisfies the ‘Automatic Overseas’ tests (“AO Tests”). If one does qualify as being ‘automatically overseas’ then, unsurprisingly, one is non-UK resident. One can consider the SRT journey over at this point.

If one does not meet one of the AO Tests then you are moved on the next leg of the journey. This step will determine whether one satisfies the Automatic UK Tests (“AUK Tests”). If one of the tests is met then the individual is UK resident.

If one has not met either of the above tests, then the journey continues on to a third and final leg.

This involves considering whether one has ‘sufficient ties’ to the UK. The sufficient ties test is essentially a ‘day counting’ exercise. The rule of thumb is that the more ‘ties’ one has to the UK then the less days one can spend in the UK without becoming UK resident.

These thresholds differ depending on whether you are trying to ‘leave’ the UK or are a ‘visitor’.


The Automatic Overseas (AO) Tests


General


Technically, the legislation sets out five AO tests. However, from a practical perspective, there are really two tests here – one totting up days in the UK and the other identifying whether one works abroad on a full time basis.


Day-counting


As eluded to above, the day count test will differ depending on whether we are talking about someone leaving the UK (“Leaver”) or someone coming to the UK (“Visitor”):


  • A Visitor is automatically non-UK resident if his days in the UK for the tax year are less than 46;
  • A Leaver presents a slightly more complex position. The general rule is that he will be non-UK resident if his days in the UK number less than 16. However, in certain circumstances single day visits to the UK (i.e. no presence at midnight) can count towards the days.


Full time work abroad


In the pre SRT days, this was often the most certain method of becoming non-UK resident. It is good to see that this remains in a relatively unsettled form.

However, the test is slightly more complex than one might imagine – largely as a result of the second part of the test where one is determining whether the overseas work is full time or not.


First of all, the individual must meet a ‘threshold’ condition. This requires the following:


  • The number of midnights spent by the Individual in the UK to be less than 91; and
  • The number of days doing 3 hours of work or more in the UK to be less than 31.


Assuming the threshold test is met, we then need to go through a step by step calculation to see if the remainder of the test is satisfied.

In the first instance one must work out the taxpayer’s ‘net overseas hours’. Essentially, this is total overseas hours worked by the individual in the year, less any ‘UK work hours’. UK work hours are only deducted if the person worked more than three hours in the UK on a particular day (a UK work day).

A ‘reference period’ is then calculated by deducting the number of UK work days and days of holiday / sickness from 365 days. This reference period is then divided by seven to give a ‘number of weeks’.

The final step is then to divide the ‘net overseas hours’ by the ‘number of weeks’.

If the result of this rather laborious calculation results in 35 or more then the test is met.


The Automatic UK (“AUK”) Tests


General


As outlined, if one does not meet the AO Test then, and only then, do we move on to the AUK test. There are three limbs under which one might be automatically resident in the UK. You might be so resident under:


  • A day-counting test;
  • A home test; and
  • Another full-time work test


Day counting


First of all, and quite simply, if a person spends 183 or more days in the UK then this is a point of no return. That person will always be considered as resident in the UK.


Home test


The second limb of the AUK test is the ‘home test’. For ‘home test’ it is perhaps better to think about it as the ‘only home test’.

It is mildly confusing at the nitty gritty level, however, one will meet the ‘home test’ in circumstances if you:


  • have a home in UK and spend at least thirty days or part days in it; and
  • do not have an overseas home (this second limb is a bit more nuanced than this but this gives you the gist).


In summary, one needs to have a UK home and not have an overseas home.


Full time work test


This test is almost exactly as the full time work test under the AO Test.

However, and rather intuitively, its purposes is to assess the work days in the UK rather than the days overseas. Therefore, we are interested in ‘net UK hours’ rather than ‘net overseas hours’.

If the final answer which pops out of the sausage machine is 35 or more then, this time, one is UK resident.

The key difference is that the reference period may be a 365 day period which is non-coterminous with the tax year.

If one does not come to an answer after reviewing the AUK tests then you move on to the ‘Sufficient ties’ test.


Sufficient ties test


This test involves applying a day count to a specific threshold.

However, that threshold is higher or lower depending on the number of ties one has with the UK. The more ties, the fewer days one may spend in the UK without being treated as resident for tax purposes.

It is first worth considering what constitutes a ‘tie’:


  • Family tie: A person will have a family tie if a member of his family is UK resident. Broadly, family includes a spouse and minor children.
  • Accommodation tie: A person will have an accommodation tie in the UK if he has property available for his use.
  • Work tie: if the individual performs more than three hours work in the UK on 40 or more days in the tax year he will have a work tie.
  • 90 day tie: if the individual spent 91 days or more midnights in the UK in one or both of the two prior years then he will have a 90 day tie.


There is, of course, much more depth and nuance to the definition of these ties. However, such detail is outside the scope of this article.

In addition, for ‘leavers’, there is a fifth potential tie which will be triggered where the personal has spent more midnights in the UK than in any other country.


The thresholds differ depending on whether one is a ‘leaver’ or an ‘arriver’. In summary, it is harder to escape from the UK, than it is for a visitor to become UK resident.




A table showing the day counts which results in a person becoming us resident



Conclusion


Under the old rules, in order to determine and individual’s residence status, we had an unsatisfactory ‘patchwork’ of case law plus HMRC’s published guidance in IR20. However, it was clear from seminal cases such as Gaines-Cooper that even HMRC’s guidance was beginning to creak at the seams.


Since the 2013/14 tax year, we have had cold hard legislation. It is not simple by any means as it is designed to catch a wide range of complex, modern practices. In our modern world, simplicity is probably too much to ask.


However, regardless of complexity, we do have some hard and fast rules. This will present some readily identifiable safe harbours in which a person can shelter if the fact patter permits.


A blurry picture of a city skyline at night.

BREAKING NEWS: UAE Offers Corporate Tax Penalty Relief – But You Must Act Fast to Qualify

By Amie Roberts • May 1, 2025
If you’ve missed your Corporate Tax registration deadline or already paid the AED 10,000 fine, there’s now a golden opportunity to waive or reclaim that penalty — but only if you act quickly. In a recent move to support businesses during the first year of the UAE’s Corporate Tax rollout, the Federal Tax Authority (FTA) has announced a limited-time grace period. The initiative allows eligible businesses to apply for a full penalty waiver if they file their Corporate Tax return early. This is a major relief for thousands of companies who have either: Missed their Corporate Tax registration deadline, or Registered late and were hit with the AED 10,000 fine Why is this happening? According to Gulf News, this initiative is part of a broader effort by the Ministry of Finance and the FTA to ease the transition into the new Corporate Tax system and promote long-term compliance. What You Need to Know: Deadline for the waiver: July 31, 2025 BUT: You must file your return well ahead of your official tax deadline to qualify. Don’t wait – gathering your financial records and preparing your tax return can take time. For most businesses operating on a calendar year basis (Jan–Dec), that means filing within the next couple of months. Who qualifies for the penalty waiver? If you’re asking: “Can I get a refund on my Corporate Tax late registration fine in the UAE?” “Is it possible to waive the AED 10,000 Corporate Tax penalty?” “How do I apply for the UAE Corporate Tax penalty relief?” Then the answer is – yes, you may be eligible. But there’s a catch: you must file your tax return early, ahead of your normal deadline. This is not automatic, and if you miss the window, the fine will not be waived or refunded. Why early filing matters: The FTA has made it clear: early compliance is the only route to relief. This means: Completing your Corporate Tax registration (if not already done) Preparing your financials for your first tax year Submitting your Corporate Tax return well before the deadline This one-time waiver won’t be repeated – so don’t leave it until the last minute. How Mosaic Chambers Group can help: At Mosaic Chambers Group, our FTA-certified tax advisors and legal consultants are ready to guide you through the entire process. Whether you need help: Understanding your eligibility Filing your Corporate Tax return early Claiming your AED 10,000 fine refund Or ensuring future tax compliance We’re here to take the stress out of Corporate Tax. Book a free consultation today and get expert support from our team. Click here to get in touch or below to book your call.

End of the Non-Dom Era: Labour’s Tax Reform Triggers Wealth Flight

April 15, 2025
April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains. This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles. The message is clear: if you live here, you pay here. Let's break down what has changed. What Was the Non-Dom Tax Regime? The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK. This system made the UK an attractive location for individuals with international earnings. We covered this in more detail here. What Has Changed? Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include: 1. End of Non-Dom Status All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not. 2. Inheritance Tax (IHT) on Foreign Assets Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets. 3. Temporary Reliefs To assist the transition, temporary measures include the following: Tax Year 2025-26 will see a 50% reduction on foreign income tax. Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes. Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK. Why Has the Government Made These Changes? According to Labour, eliminating non-dom status will provide many advantages: Enhance tax fairness Raise extra funds to support public services Close longstanding loopholes used by the wealthy Rising Tax Bills HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference. Making Decisions About Moving Abroad Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include: United Arab Emirates (UAE) does not levy income or capital gains tax Switzerland provides fixed annual tax arrangements for its most wealthy citizens Italy - flat tax of EUR100,000.000 on foreign income for new residents Monaco does not levy personal income tax for residents Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in: Investment into UK businesses Jobs funded by private wealth Donations to UK Charities What About Entrepreneurs? Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require: Establishing headquarters or structures outside the UK Reconsider ownership of intellectual property or company shares An investigation of how profits and dividends are managed is important to ensure long-term growth. What Should Be Done Now? If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do. 1. Consult With A Specialist Tax Advisor Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations. 2. Evaluate Your Financial Structures Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes. 3. Consider Relocating If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions. Summary The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it. Now is the time to review your plans, secure your assets, and seek professional guidance. How Can We Assist? At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions. If you have any queries about this article or need advice then get in touch.
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