Non Residence

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HMRC has now introduced a Statutory Residence Test (SRT) with effect from 06/04/2013, the main details of which affecting Britons’ working abroad, are outlined below (see also news page).

Individuals who work overseas can become Not Resident (NR) for UK tax purposes provided they meet all of the criteria of the 3rd Automatic Overseas Test.

You work full-time overseas over the tax year, without any significant breaks* during the tax year from overseas work, and:

• you spend fewer than 91 days in the UK in the tax year
• the number of days in the tax year on which you work for more than three hours in the UK is less than 31.

*You will have a significant break from overseas work if at least 31 days go by and not one of those days is a day on which you:

• work for more than three hours overseas, or
• would have worked for more than three hours overseas but you do not do so because you are on annual leave, sick leave or parenting leave. (rotational leave is not considered as annual leave)

If you have a significant break from overseas work you will not qualify for full-time work overseas.

In most cases work is considered to be done at the location where it is actually done rather than where an employment is held or a trade, profession or vocation is carried on.

The third automatic overseas test does not apply to you if:

• you have a relevant job on board a vehicle, aircraft or ship at any time in the relevant tax year, and
• at least six of the trips you make in that year as part of that job are cross-border trips that:
• begin in the UK
• end in the UK, or
• begin and end in the UK.

Information below under the appropriate heading explains how to calculate whether you have worked sufficient hours overseas to count as full-time work overseas.

Do you work full-time overseas?

You will be considered to work full-time overseas if you work for sufficient hours* overseas as calculated over the tax year in the case of the third automatic overseas test, or other relevant period in the case of split year cases. To calculate if you work sufficient hours overseas, take the following steps:

Step 1

Identify any “disregarded days”: these are any days in the tax year, or the relevant period in the case of split years, on which you work for more than three hours in the UK, including those days when you also do some work overseas on the same day.

Step 2

Calculate your “net overseas hours”: add up (for all your employments and/or trades you carried on) the total number of hours that you worked overseas in the tax year, or the relevant period in the case of split years; do not include in your net overseas hours any hours that you worked overseas on disregarded days.

Step 3

Calculate the number of days in your “reference period”. To do this you should subtract from 365 (366 if the tax year includes 29 February), or the relevant period in the case of a split year:

• the total number of disregarded days
• any days that were part of gaps between employments
• other days that can reduce the reference period.

Step 4

Divide the number of days in your reference period by seven. If the answer is more than one and is not a whole number, you should round your answer down to the nearest whole number. If the answer is less than one, round up to one.

Step 5

Divide your net overseas hours by the number resulting from Step 4. If your answer is 35 or more you have worked sufficient hours overseas during either:

• that particular tax year, or
• the relevant period for split year cases.
  *Sufficient hours

To achieve an average of 35 hours/week a minimum of 1850 hours per tax year should be worked overseas.

We recommend that with effect from 6 April 2013 all clients wishing to claim NR status for UK tax purposes, who do not already do so, obtain/retain copies of signed time sheets, countersigned where possible by their manager/employer. See below a further extract from the HMRC guidance notes, this one relevant to working hours and location of work done and the types of additional documentation that should be kept.

Working hours and location of work done

Where your residence status is determined by the automatic tests relating to working full-time overseas, you should keep information and records relating to:

• the split in your working life between the UK and overseas, particularly noting days where you worked (including training, being on stand-by and travelling) for more or less than three hours
• the nature and duration of your work activities – a work diary/calendar or timesheet is likely to indicate this. You may find that it would be beneficial to ensure your diary is sufficiently detailed, maybe reflecting hours worked and the nature of your work, for example reviewing and responding to emails, meetings, or filing travel claims
• breaks you had from working, for example between jobs, and why
• your periods of annual, sick or parenting leave
• time you spend visiting dependent children (those under the age of 18) when they are in the UK
• time you had to spend in the UK owing to exceptional circumstances:
  • what your circumstances were
  • what you did to mitigate them where that was possible, for example making alternative travel arrangements
• your contracts of employment, and documentation/communications which relate to these, particularly to curtailment or extension of these or other changes to them.

It is our firm belief that failure to retain such documentation could result in any claim to NR status being rejected by HMRC, as it will be up to each individual to prove FTWA rather than HMRC having to prove otherwise.

Evidence to be provided

• A completed schedule of UK arrivals and departures, signed by you annually, a completed NR Work History Schedule and a completed Home Overseas questionnaire. Blank forms are available on the forms page.
• Airline tickets, boarding passes, E-tickets etc.
• Passport stamps for non EU travel.
• Holiday booking invoices and travel documentation.
• Credit/debit card receipts for expenditure incurred by you whilst on holiday. Such receipts should be obtained 1 or 2 days after arrival in your holiday destination, sometime in the middle of your stay and 1 or 2 days before departure/UK return.
• Overseas car hire receipts etc.

HMRC can also ask to see mobile telephone statements, bank and credit card statements, utility bills etc.

This list is to be used as a guide only and may not be exhaustive.