The Statutory Residence Test

The Statutory Residence Test (SRT) determines an individual’s tax residency status in the UK, which in turn affects their tax liabilities in the UK.

This means that if you’re a UK resident for tax purposes, you’ll be subject to UK income tax on your worldwide income and capital gains, whereas if you’re a non-resident, you’ll only be subject to UK tax on your UK source income and capital gains.

The SRT was introduced to provide a clear and objective framework for determining UK tax residency, replacing the old and subjective system of determining residency based on individual circumstances. This has helped to reduce uncertainty and provide greater clarity for individuals, HM Revenue & Customs.

The Statutory Residence Test also helps to ensure that taxpayers are paying the correct amount of tax in the UK. By using a set of objective criteria to determine residency status, the SRT reduces the risk of taxpayers underpaying or overpaying their taxes, which can lead to penalties and other consequences.

The SRT is based on a combination of factors, including:

  • The number of days an individual spends in the UK
  • Their ties to the UK
  • Their connections to other countries

The test is split into three parts:

  1. The automatic UK tests
  2. The automatic overseas tests
  3. The sufficient ties tests

The automatic UK tests consider an individual to be UK resident if they spend 183 or more days in the UK in a tax year, or if they have a UK home that they have access to for a continuous period of 91 days or more during the tax year, and they spend at least one night in that home during the tax year.

The automatic overseas tests consider an individual to be non-UK resident if they spend fewer than 16 days in the UK during the tax year, or if they have been non-UK resident for the previous three tax years and spend fewer than 46 days in the UK in the current tax year.

The sufficient ties tests consider an individual’s connections to the UK, such as their family ties, accommodation, work, and time spent in the UK in previous tax years. If an individual has enough connections to the UK, they may be considered UK resident for tax purposes.

Although the Statutory Residence Test can determine whether an individual is a UK resident for tax purposes, it may not always provide a definitive answer. Even if the test shows that an individual is a UK resident, they may still be considered tax resident in other countries as well.

Therefore, it’s important to consult the local legislation in those countries to determine whether they also qualify as residents. In some cases, only the tie breaker clauses of Double Taxation treaties can provide a final answer that can be relied upon.

If you would like advice on determining your UK residency position, please seek appropriate advice by contacting any member of our private client team.