November 2006

New Rules on Residence

A recent court victory has changed the way HM Revenue & Customs calculates whether you are deemed to be resident in Britain and therefore whether you must pay UK tax on your worldwide income and gains.

Until now, the taxman has excluded the days you arrive and leave when calculating the number of days spent in the UK. Therefore if you arrived on a Monday and left on a Tuesday this was recorded as no days being spent in the UK.

The number of days is relevant as to be regarded as non resident, you must spend no more than 90 days a year on average in the UK over a four-year period, and less than 183 days in any one tax year.

In the case of Gaines-Cooper v Revenue and Customs the Revenue successfully argued that the normal rule of ignoring both the dates of arrival and departure, and also single days, distorted the picture.

In effect, it means that people who live abroad but visit Britain regularly will be able to spend fewer days in this country before they fall foul of the taxman.