Budget Notes

BN102 RESIDENCE AND DOMICILE: THE RESIDENCE TEST AND DAY COUNTING RULES

Who is likely to be affected?

1. Non-resident individuals visiting the UK and UK resident individuals leaving the UK.

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to change the way days are counted for residence test purposes.

Operative date

3. This change will have effect on and after 6 April 2008.

Current law and proposed revisions

4. Under the current rules, when deciding if an individual is resident in the UK for tax purposes all days spent in the UK are normally counted, except for days on which the individual arrives in, or departs from, the UK. At the Pre-Budget Report it was proposed that days of arrival and days of departure should count as a day of presence in the UK, subject to an exemption for transit passengers.

5. The changes announced today mean that on and after 6 April 2008, any day where the individual is present in the UK at midnight will be counted as a day of presence in the UK for residence test purposes.

6. There will be an additional exemption for passengers who are in transit between two places outside the UK. The exemption is wider than that proposed at the Pre-Budget Report as it caters for people who have to change airports or terminals when transiting through the UK. It will also allow people to switch between modes of transport, so they could fly in but leave by ferry or train for example. Days spent in transit, which could involve being in the UK at midnight, will not be counted as days of presence in the UK for residence test purposes so long as during transit the individual does not engage in activities that are to a substantial extent unrelated to their passage through the UK. So, for example, if they take time out to attend a business meeting then the transit exemption will not have effect.

Further advice

7. If you have any questions about this change, please email offshorepersonal.taxteam@hmrc.gsi.gov.uk or telephone 020 7147 2762. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk