As Robert Gaines-Cooper finally loses his appeal in his long running battle with the Revenue to establish that he ceased to be UK resident almost 20 years ago, attention is now turning to the proposed new statutory residency test due to come into effect in April 2012.
Commenting on the Gaines-Cooper appeal loss, Geoffrey Todd, a private client and tax partner at law firm Boodle Hatfield said: “This case illustrates the difficulty some internationally mobile taxpayers have had in recent years in determining their residence position. It could be regarded as largely of historical interest since IR20 has been replaced by new guidance in the form of HMRC6, and in April next year the UK will have a statutory residence test, largely based on simpler day-counting tests."
"However we will not be entirely free of the old rules, since the new test will retain some of its features where day-counting alone does not give a clear result, and periods of residence up to April 2012 will be determined under the old rules. Certainly people will feel more cautious about relying on Revenue guidance," adds Todd.
Janet Pilborough-Skinner, private client director at accountancy firm Mazars also urges caution. Pilborough-Skinner says that while the new test is meant to help clarify UK residency rules, the proposals in their current form do introduce a certain amount of complexity.
"The proposed new test will be based on looking at how many factors an individual has “connecting” them with the UK. These connections will look at such things as the number of days in the UK, available accommodation, family and previous residence pattern. However, a certain amount of complexity has been introduced with the various new day counting rules. Ironically, the proposed new rules do make it easier for longer term non residents that do not work abroad to spend more time back in the UK, whilst those going abroad to work appear to be penalised by having to restrict their visits back to the UK even further," she explains.
In addition, a new split year rule is proposed that will be aligned with the connection rules in the proposed statutory residence test. This means it will be harder to benefit from split year treatment.
"In particular, if someone moves permanently abroad to benefit from split year treatment, they must not set foot in the UK for the remainder of that tax year. This may be impractical, for example, if they are selling up in order to sever their connections with the UK, or indeed have to return because of family obligations for even one day," comments Pilborough-Skinner.
"So whilst these proposals are welcome, we await the results of the consultation period with extreme interest to see if the Government is willing to incorporate any of the suggested amendments to their own proposals," she adds.
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