The Court of Appeal recently ruled that being in full-time employment abroad was enough in itself to prevent UK residence for Income Tax (IT) purposes, as long as the employment was for the whole of the tax year. It had previously been thought that some lessening of ties with the UK was also necessary: for example, disposing of property or other assets in the UK, or severing social connections. However, updated guidance from HM Revenue & Customs (HMRC) means the position is once again unclear.
Crucial to the Court’s decision was paragraph 2.2 of IR20, the guidance given by HMRC on this subject that applied at the time. This stated that an individual leaving the UK to work abroad full-time would be treated as neither resident nor ordinarily resident for IT purposes, provided:
- the employment abroad lasts for at least a whole tax year; and
- any visits to the UK during this time total less than 183 days in any one tax year, and average less than 91 days per tax year.
From 6 April 2009, however, HMRC have replaced IR20 with new guidance, entitled HMRC 6. Although the paragraph (8.5) dealing with full-time employment abroad is broadly similar to paragraph 2.2 of IR20, it is not clear whether paragraph 1.5.22 is also relevant in this situation. This states:
‘You should always look at the pattern of your lifestyle when deciding whether you are resident in the UK […] Just because you leave the UK to live or work abroad does not necessarily prove that you are no longer resident here if, for example, you keep connections in the UK such as property, economic interests, available accommodation, and social activities or if you have children in education here.’
It remains to be seen whether the impact of the updated guidance will be to circumvent the Court’s decision. Tax legislation does provide that ‘living accommodation’ available in the UK will not affect the residence status of those in full-time employment abroad: however, it is unclear if this still applies when the individual’s family continue to live in the accommodation.
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