business & tax

UK Ordinarily Resident

For most countries, including the UK, you are resident if you live in that country for 183 days or more in a given tax year.

This is different under UK law to your Domicile (which decides whether you are subject to UK Inheritance Taxes on Worldwide Assets - not just your UK assets).

The UK tax year runs from 6 April to 5 April in the following calendar year.  For many other countries, the tax year is 1 January to 31 December.   Some countries, but not many, have other dates.

UK Residency - Means being subject to UK Income Tax

• If you are resident in the UK, you are subject to UK taxation laws.
• If you are not resident but have assets in the UK, those assets are subject to UK taxation laws.
• The days of arrival and departure are generally ignored, although a ruling in 2006 said that the day of arrival and departure should be counted as one day in total.
• The number of days you spend in the UK are accumulated over the year and if you reach 183 days, you are resident in the UK for tax purposes.
• If you arrive with the intention of staying in the UK for more than 183 days, you are resident for tax purposes on day one.
• If you live outside the UK for over 183 days, you are not resident.  This does not mean you can move overseas for one year and be free of income or capital or inheritance taxes.  You would still be deemed ordinarily resident and therefore subject to capital taxes.   You would also still be UK domiciled and subject to inheritance taxes.

Residency test for days that do not count: If you are in the UK at Midnight on any given day, this counts towards the numbers of days as a resident.  Days that you are in transit, even if say you land in the UK pass through passport control and the get on a train and then a ferry two days later to another country do not count, provided the only reason you were here was that you are in transit.

AS WELL AS BEING UK RESIDENT THERE ARE ALSO TAXES FOR BEING ORDINARILY RESIDENT

Ordinarily Resident - Meaning

As well as being resident for income taxes (the 183 day rule see above), if the UK is your 'habitual home' i.e. you 'normally' live in the UK or you arrive in the UK and intend to 'normally' live in the UK, you are 'ordinarily resident' and therefore also subject to UK capital gains tax.

Ordinarily Resident: Coming to UK

If you come to the UK with the intention of staying in the UK for 3 or more years, you become ordinarily resident on day 1.  This means you are subject to both income taxes (as you are resident) and capital gains taxes (as you become ordinarily resident).  Therefore, many people claim that they are coming to the UK for 2 years or less.  The danger is then if you stay for longer than 2 years.

UK Ordinarily Resident - Leaving UK

If you move overseas for a period of time out of the UK and become a non-resident, you may still be deemed ordinarily resident for tax purposes. 

For example, you cannot simply move overseas for a year, sell your portfolio of rental property investments and avoid capital gains taxes.

Difficult to Lose UK Ordinarily Resident Status

If you habitually visit the UK after you have left and spend too much time in the UK, you will still be deemed ordinarily resident and subject to capital taxes.

• 91 Day, 5 Year Rule - Broadly speaking, if you spend 91 days or more each year for five consecutive 'tax years'  in the UK, you retain Ordinarily Resident status.
  
• After 5 Years you become ordinarily resident overseas and not subject to capital taxes.
• Deliberate Intention - You must clearly be able to demonstrate that you do not intend to make habitual and substantial visits to the UK