Intertwined - records and residence

6 April 2013 saw the start of a brand new way of determining the UK tax residence status of individuals. Known as the Statutory Residence Test (SRT) it provides a series of tests which, when correctly followed, will enable a definitive answer to be given to the question 'Am I resident in the UK?'

The tests cover a wide range of issues including:

• days spent in the UK
• employment or business activities both in the UK and in other countries
• the existence of a home, whether in the UK or overseas
• the residence of a spouse or live-in partner and
• availability of accommodation.

This article cannot consider the detail of the rules but we can supply you with more information on the likely application of the rules to your situation.

What is clear is that anyone wishing to claim non-resident status should be aware that such a claim will require evidence to support it. In the absence of sufficient evidence, HMRC will be entitled to reject the claim and regard the individual as UK resident which may have significant, adverse consequences. We understand that keeping detailed records can be a bit of a pain especially when coping with a modern business life which is hectic and stressful. However, finding that you have a significant tax bill because HMRC will not accept a claim for non-residence could be a very high price to pay for not spending just a few minutes each day recording some basic information.

What records?

There is no set list of records but we consider that the following evidence would be the minimum that is likely to be required by HMRC.

All individuals should keep records to show their movements in and out of the UK and in other countries. The minimum requirements will be to record:

• days when you were in the UK at midnight
• identify any days where you were in the UK at midnight but only because circumstances beyond your control meant that you had to remain in this country
• identify also any days when you were in the UK at midnight but were simply in transit on to another country (provided you did not have any business in the UK during your transit period)
• days when you were in the UK during any part of the day but not at midnight
• if you were not in the UK at midnight, where were you?

If you have a home overseas (you don't have to own it) you will need to record all the days on which you were present in that home in each tax year. HMRC may wish to see evidence to justify why you think a particular property should be regarded as a home for this purpose.

Individuals who are working either as employees or as self-employed individuals in their own business should have copies of any employment contracts or contracts for their services and will also need to have records of:

• the hours spent working in the UK on any day
• the hours spent working overseas each day
• days when you were on annual, sick, or parenting leave from your work overseas.

The list looks formidable but can be reduced to a basic spreadsheet. Armed with that information it will be possible to give advice on your residence status for UK tax purposes. Without it the advice would be very provisional and the position could well be challenged by HMRC.