Split Year Treatment under new SRT
Normally, if you are resident in the UK for any part of a tax year you will be taxed as a UK resident for the whole of the tax year. However, there are special rules which may apply to you if you either leave the UK to live or work abroad or come from abroad to live or work in the UK. These special rules split the tax year into a UK part, when you are taxed as a UK resident, and an overseas part, when you are taxes as a non-UK resident.
When can you claim Split Year treatment?
Before 6 April 2013, HMRC operated these special rules as a concession known as Extra Statutory Concession A11. After 5 April 2013, these special rules are contained in law, under the Statutory Residence Test ('SRT'). Once you have determined using the new SRT test that you are non-resident for part of the year you still need to find out what is the exact date where the status changes. As with the residence test, treatment is different whether you are a leaver or an arriver. Here are the rules for finding out that date:
Leavers
1 - starting full time work abroad
2 - partner of someone in case 1
3 - ceasing to have a home in the UK
Date decided by order of priority (1,2 and then 3)
Arrivers
4 - starting date to have a home in UK only
5 - starting full time work in the UK
6 - ceasing full time work abroad
7 - partner of person in case 6
8 - starting to have a home in the UK
Case 6 takes priority unless case 5 occurs before case 6, then case 5 takes priority over case 6. Case 7 then applies, then the earliest of case 4, 5 and 8.
Definition of Full-Time Work
Under the Statutory Residence Test (SRT), "full-time work" is defined as employment that averages at least 35 hours per week over a 365-day period. When calculating whether an individual meets this threshold, certain days are disregarded, including:
- Non-Working Days: Holidays, weekends, and any other non-working days when no work is performed.
- Sick Leave: Periods of absence due to illness or injury.
- Unpaid Leave: Days taken off without pay.
To establish whether an individual works full-time in the UK, their working hours must be spread across sufficient days such that the average meets the required threshold. If an individual works part of the year abroad and part of the year in the UK, these periods must be considered separately to determine the application of split-year treatment.
Definition of Having a Home in the UK
For the purposes of the SRT, an individual is considered to have a "home" in the UK if they meet the following criteria:
- Availability: The property must be available for the individual to use as a place of residence for a continuous period of 91 days or more during the tax year. The property does not need to be owned by the individual and could be rented or even provided by a third party.
- Use: The individual must spend at least 30 days at the property during the tax year. A "day" is defined as any day when the individual is present in the property at midnight.
- Exclusions: Temporary accommodations, such as hotels or short-term stays while travelling for work, do not typically qualify as a home under the SRT.
If an individual has a home both in the UK and abroad, the tie-breaker provisions of the SRT will determine their residence status based on factors such as the number of ties to the UK and the amount of time spent in the country.
As always when dealing with complex arrival cases, it may be important for mobile employees and their employers to seek professional advice to establish when residence is treated as starting and when withholding obligations arise on employment income. The rules are designed in a such a way such that an individual may be treated as resident or non-resident at a point which is different from when they arrive or leave the UK.
