The Statutory Residence Test was introduced by HMRC to determine the tax residence status of individuals with connections to the UK. The Statutory Residence Test, while complex, is vital when it comes to understanding your UK tax status and could mean that your worldwide income is subject to UK tax. Failure to correctly declare and pay tax on any income could lead to penalties and fines.
If you’re classed as UK tax resident, you’ll be taxed on your worldwide income, unless your permanent home (‘domicile’) is abroad. This includes:
- Wages, if you work abroad
- Foreign investments and savings interest
- Rental income from an overseas property
- Income from pensions held overseas.
But what if I’ve paid tax on my foreign income already?
You can claim Foreign Tax Credit relief when you report your overseas income on your Self Assessment tax return. The tax relief you’ll get depends on the UK’s double-taxation agreement with the country your income comes from. You can usually get relief even if there isn’t an agreement. This is called Unilateral relief; Foreign Tax Credit relief is generally given at the lower of the actual tax suffered and the equivalent UK tax on the same income.
How do I know my tax status?
HMRC have produced guidance on their website to help you understand your tax residence status. The charts below walk you through a simplified tax residency process.
Due to the complexity of the Statutory Residence Test, it’s always advisable to seek professional advice from a tax expert with experience in correctly determining your residence status.
View the Statutory Residency Test chart (opens in a new browser window)
View the detail of the Second automatic UK test (opens in a new browser window)
Don’t worry if you’re finding HMRC’s language or questions difficult – you’re not the only one! If you’re a Crunch client we can help you work out your UK Tax Residence position, please get in touch with your client manager.
In order to help you we’ll need you to provide answers to the following questions:
- How many days were you in the UK between the 06/04/2017 and 05/04/2018?
- How many days were you in the UK between the 06/04/2016 and 05/04/2017?
- How many days were you in the UK between the 06/04/2015 and 05/04/2016?
- How many days did you work in the UK (more than three hours per day)?
- How many days did you work overseas (more than three hours per day)?
- Did you have a UK home between 06/04/2017 & 05/04/2018? If yes, for how many days?
- Did you have an overseas home between 06/04/2017 & 05/04/2018? If yes, for how many days?
- What date did you arrive in the UK?
- What date did you leave the UK?
- Where were you born?
- Where were your parents born?
- When are you likely to return to the UK?
- Where do you consider to be your current permanent home?
- Do you have any family or work ties in the UK?