Statutory residence test recommended by CIOT
26th November 2007
The Chartered Institute of Taxation (CIOT) has issued a statement recommending that a statutory and comprehensive residence test should be introduced, as part of a proper reform package. This follows the announcements in the Pre-Budget Report of changes to the residence and domicile rules.
Emma Chamberlain, who is a well known barrister and CIOT spokeswoman (see a biography here), says:
“In the present era of great personal mobility in work and personal life it is essential that an individual can know, with certainty, what circumstances will render him resident in the UK. If an individual cannot do this, he or she will err on the side of caution and limit or avoid visits to the UK. This will reduce spending in the UK and diminish business activity here. As a result the economy will suffer and there will be loss of tax revenue. Moreover it is unacceptable that many individuals who leave this country to work abroad cannot know with certainty whether or not they are still UK resident.”
The CIOT is recommending a simplification of the rules determining whether an individual is resident in the UK, which are currently a mess, mainly based on very old case law.
Emma Chamberlain adds:
“The UK is alone in having a test which can make someone resident on as little as 90 days here. A business traveller who comes to London for a meeting, stays overnight and leaves the next day may well spend less than 24 hours in the UK on each occasion. Whereas previously this did not count at all, now it counts as two days. This allows business travellers who are not from a country which has an appropriate double tax treaty only 45 visits to the UK a year, fewer than 4 a month, or even fewer if they also have the odd holiday here as well. This will have a genuine and really serious impact on London and other major UK cities as places to do business.”
The CIOT suggest a test based solely on the number of days (say, 120 including arrival and departure) in the tax year that an individual was present in the UK, which could a rolling average over a number of years.
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