Tricky traps in the UK’s Statutory Residence Test
Following the changes to the UK’s tax regime in April 2025, a person’s residence (or non-residence) position in the UK has become even more important as a deciding factor for their UK tax liability. Not only does the new “Four Year Regime” require a taxpayer to have been non-UK resident for at least 10 full tax years before they can access its benefits, but also residence is now the sole determining factor for inheritance tax. Whereas in the past the concept of “domicile” determined whether a person’s estate was subject to UK inheritance tax (charged at 40%), it is now the case that once someone has been resident in the UK under the Statutory Residence Test (and the rules which applied before the Statutory Residence Test was introduced) for ten of the previous twenty tax years their worldwide estate will be exposed to inheritance tax on death.
Our separate article here discusses the Statutory Residence Test (or SRT) in detail, but while the SRT is a great improvement on the position prior to the introduction of the SRT, the complexity of the rules can lead to some unexpected results. In this brief update we explore five such “traps” in the legislation, through which a person could unexpectedly find themselves resident in the UK for tax purposes.
The “only home” test : a potential trap for those seeking to become non-resident, and what is a “home”?
Many readers will be familiar with the three parts to the SRT: rules under which a person is automatically resident in the UK, rules under which a person is automatically non-resident in the UK, and the “sufficient ties” test, where residence is determined by a combination of “ties” to the UK and the number of days spent in the UK. What is less well-known is that the parts have to be applied in order: first the 183 day residence test; then the automatic non-residence tests; then the other automatic residence tests, and only then the sufficient ties test. A taxpayer cannot pick and choose which part of the SRT they wish to use.
This ordering rule can catch out taxpayers who wish to leave the UK but currently have only one home and that is in the UK. We saw this where, ahead of the change in the UK tax rules from 6 April 2025, some UK residents decided to become non-UK resident from 6 April, planning to move outside the UK later in the year and rely on the sufficient ties test to become non-resident.
An often overlooked part of the automatic residence test is the “only home” test. A person will be considered to meet the test for only having a home in the UK if that person spends at least 30 days in their UK home during the relevant tax year, and there is a period of 91 days (30 of which are in the relevant tax year) when the person does not have another home outside the UK, or has another home but has spent fewer than 30 days there during the tax year.
It might be expected that as so much of the SRT is concerned with day counts and time spent in the UK, a person could use their UK home for a couple of months at the beginning of the tax year and then leave the UK, in order to become non-UK tax resident for the entire tax year having kept under their relevant day count. However, the only home test means that if in that situation the person is staying in their UK home and has not yet bought or rented another home outside the UK, they could meet the automatic UK residence test if there is a 91 day period where their only home is in the UK. The test is also met if the person does own a residence in another country, but so far has only been using it as a holiday home.
To use Amy as an example of this:
Amy is planning to move to Switzerland in the tax year 2026-2027 and to stop being UK resident. She does not work in the UK, and has no immediate family in the UK. She has looked at her ties to the UK and determined that she can keep her UK house and spend 90 days in the UK during the tax year without becoming UK resident again.She plans to spend April and May in her home in the UK while she looks for a property in Switzerland, and she will then move to Switzerland during June to enjoy the summer. She will still have a few days of her total of 90 to spend in the UK during the rest of the tax year.
Amy thinks that because she is careful to keep within her day count she will not be resident in the UK from 6 April 2026. However, there will be a (at least) 91 day period when Amy’s only home is in the UK, and 30 days of that period will fall within the tax year 2026-2027. Amy will therefore meet the requirements of the only home in the UK test, and will be automatically resident in the UK for the whole of the 2026-2027 tax year. She may have to rely on split year treatment to avoid being subject to UK tax for the entire tax year. However this will not help Amy if it was important for her to be non UK resident throughout 2026/27.
Any consideration of whether a taxpayer has a home in the UK or overseas highlights the fact that the definition of “home” within the SRT legislation is not complete. The legislation simply provides that it does not have to be owned by the person, but there must be a degree of permanence and stability to the person’s use of the place for it to be a home. A holiday home, used only periodically, will not count as a “home”. This skimpy definition is all well and good for simple cases such as a taxpayer who has a main home in the UK and a holiday home abroad which they use for just four weeks a year. However, for non clearcut cases (such as a married couple who both had homes before their marriage in different parts of the UK, both retained and not let out, or a family with an overseas property used for all school holidays), the taxpayer has to resort to HMRC guidance in their Residence and FIG Regime Manual and hope that he/she finds an example that matches their own circumstances.
What is “work”?
“Work” in important in three areas of the SRT: the automatic residence test of full time work in the UK, the automatic non-residence test of full time work outside the UK, and the “work tie” to the UK. “Work” in these contexts is not simply work as an employee, it can also include duties carried out as part of a trade or profession, or as a non-executive director (for example).
A key focus of HMRC is work undertaken in the UK by an individual who considers themselves to be non-resident: have they really had no more than 30 workdays in the UK (those claiming to be automatically non-resident on the basis of full time work outside the UK) or fewer than 40 UK workdays (for those relying on the sufficient ties test)? The first trap here is the definition of a workday as a day on which more than just three hours of work is done. A second trap, particularly for those coming to the UK for work and needing to restrict their workdays is that travel time within the UK can also count as work if the costs of such travel are tax-deductible, or if the person is actually working while travelling. In an age of video calls and emails it is therefore very easy for a person to have worked for over three hours during a day spent in the UK when (for example) time travelling to and from the airport and a meeting is included in the total.
The easiest way to manage the risk is to have certain days which are designated as work days, on which a full day of work can be done, and to restrict work in the UK to those days only. It is very difficult to prove to HMRC that you have worked for fewer than three hours on a day in the UK, so if possible, it is better not to try, and to keep to fewer than 30/40 full days of work, with no work carried out in the UK on other days.
Exceptional circumstances can be exceptionally hard to prove
The relief for “exceptional circumstances” permits certain days spent in the UK to be excluded from a person’s day count for SRT purposes, provided certain conditions are met. The relief will therefore be relevant for those taxpayers who wish to remain non UK resident and, absent the relief, have spent too many days in the UK.
The legislation outlines that the “exceptional circumstances” in question must be beyond the individual’s control and prevent the individual from leaving the UK and the individual must intend to leave the UK as soon as these circumstances permit. The legislation suggests examples such as national or local emergencies, war, civil unrest, natural disaster, or a sudden or life-threatening medical issue. The exceptional circumstance exemption is subject to a 60-day limit per tax year.
Although the legislation states that the exceptional circumstances must apply to a taxpayer who is already in the UK, HMRC guidance (again in their Residence and FIG Regime Manual) goes further than the legislation and says that exceptional circumstances may apply to individuals having to return to the UK (but again this is only under specific criteria, such as relating to civil unrest or natural disaster). An individual returning to the UK, say, for medical treatment is unlikely to be able to claim exceptional circumstances. In general individuals wishing to claim exceptional circumstances on returning to the UK should rely on the publication of Foreign and Commonwealth Office and HMRC advice (for example FCO advice was published following the outbreak of the war in Ukraine and the COVID pandemic). However, even in such circumstances the 60 day limit is strictly imposed.
Exceptional circumstances will only be permitted for day count purposes while the taxpayer is unable to plan arrangements to manage them. In practice, this can be quite difficult to prove: for example, a person may need to stay in the UK due to their child’s serious illness or accident which may qualify as an exceptional circumstance, but once the child is well enough to move to a hospital outside the UK, but the family choose to stay in the UK to continue the treatment, the relief may no longer apply. Questions around how to evidence the relevant person’s state of health are likely to arise. Keeping contemporaneous records is vital.
The fact that exceptional circumstances relief is the one SRT area that has so far gone to Court (and indeed in the one case, the judgement ping-ponged between finding for the taxpayer and for HMRC) is an indication of the subjectivity involved in claiming it. See our firm’s article on this here. It is also an area which has been the subject of an HMRC “nudge” campaign. This means that any taxpayer who considers they may be eligible to claim exceptional circumstances is well advised to seek guidance on their situation and the records required to prove their case.
Finally, HMRC does not consider travel issues to be “exceptional” and so it is always prudent to keep some days in reserve each year to allow for travel delays on departure.
Split years can be elusive
As a general rule a person will be resident in the UK for the whole of each tax year, which starts on 6 April. In some circumstances, where an individual is coming to or leaving the UK, it can be possible to split the tax year into a non-UK resident part and a UK-resident part, but there are only specific circumstances, set out in the SRT legislation, when this is possible, and the exact criteria for each situation must be met.
In our experience, the most commonly used “split year” situations are where a person moves to or from the UK to take up full time work, or where a person is the partner of someone doing this. For those in part time work, or who are not working, the opportunity for SRT split year is much more restrictive, particularly where they wish to keep their UK or overseas home. For those who are coming to the UK, this may mean that they are taxed as a UK resident from the start of the tax year of arrival and this could be an unexpected shock.
Even those who qualify for the SRT split year may be caught out as the “split” may not occur on the day of arrival or departure. For example, someone going overseas for full time work is likely to start their split year on the first day they do more than three hours of work overseas. Anyone planning a settling in period first may find that their UK-resident part of the year longer than expected, which may be a shock if they were hoping to receive income free of income tax early into their time outside the UK.
Pre 2013 residence
The SRT applies from the tax year 2013/14, and compared to the previous regime provides far greater certainty for those wishing either to become or to cease to be resident in the UK. Before the introduction of the SRT there was no comprehensive statutory rule, and taxpayers were therefore required to apply case law (some of it very old) to their own situations. HMRC had issued guidance but refused to be bound by that guidance, adding to the uncertainty.
With the introduction of the new tax rules from April 2025, some taxpayers will need to assess their UK residence position over the last twenty years. This will take them back to the years before 2013/14, and it may therefore be necessary to consider whether they were resident under the old rules. This will require careful assessment and it may be difficult to prove that a person was not resident in the UK in (e.g.) 2007/08 if they have not kept detailed records of their travel.
How we can help
We hope that our comments above give some idea of the complexities of the SRT, and how it can be easy to get UK residence/non-residence status wrong. A question we are frequently asked is “how will HMRC know”, and we always remind clients that the UK has a self assessment system, so that it is the individual’s responsibility to ensure that they are reporting their tax position correctly. If HMRC discover that people have been intentionally reporting their position incorrectly heavy penalties can apply.
We have deep experience in advising on the SRT, and can help clients successfully navigate its tricky traps. We are here to help you.
