Resident

A resident is an individual or company that is considered to be based in the UK for taxation purposes, determined by specific criteria set by HM Revenue and Customs (HMRC).
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Definition of Resident

A resident in the context of UK taxation is defined as an individual or company that meets certain criteria established by HM Revenue and Customs (HMRC) to determine tax liability for a given tax year. Residents are typically subjected to UK tax on their worldwide income and capital gains unless exceptions apply through double taxation agreements.

Individual Residents

For Individuals, a person is considered a UK resident if any of the following conditions apply:

  1. The person is present in the UK for 183 days or more during the tax year.
  2. The person makes substantial visits to the UK, averaging 90 days or more each year for four or more consecutive years.
  3. The person has accommodation available for use in the UK and makes use of it at least once during the tax year, unless:
    • The person is working full-time abroad, or
    • The person comes to the UK for a temporary purpose only.

Resident Companies

A resident company is taxable on its worldwide income and capital gains. The rules were updated on March 15, 1988:

  • Companies incorporated in the UK are considered UK residents for corporation tax purposes, regardless of where their management and control are exercised, unless specified otherwise by a double taxation agreement.

Examples

  1. Individual Resident: Jane, an IT consultant, spends 210 days working in the UK within the tax year. She meets the first criterion and is thus a UK resident.
  2. Substantial Visits: Mark, an artist, visits the UK multiple times in a year, totaling 100 days each year for the past five years. He qualifies as a resident through the substantial visits criterion.
  3. Resident Company: ABC Ltd., a company incorporated in the UK and managed from the USA, remains a UK resident for corporation tax purposes.

Frequently Asked Questions

Q: What happens if I’m present in the UK for just 182 days? A: You would not meet the 183-day criterion for UK residency based on days present alone. Other conditions would need to be reviewed to determine if you are a resident.

Q: How do temporary visits affect my residency status? A: Temporary visits alone may not make you a resident unless they average 90 days annually over four or more consecutive years.

Q: If I move out of the UK, how does it affect my residency status? A: Your residency status depends on whether you meet any of the HMRC’s criteria in the subsequent tax years. It might also be influenced by full-time employment abroad.

  • Domicile: A person’s permanent legal residence.
  • Double Taxation Agreement: An agreement between two countries to avoid taxing the same income twice.
  • Corporation Tax: A tax on the profits of incorporated entities.

Online Resources

Suggested Books for Further Studies

  1. “Bloomsbury Professional Tax Residence and Domicile” by Jon Golding
  2. “Tax Treaties and Residence of Companies” by Guglielmo Maisto
  3. “Personal Tax Planning: Principles and Practice” by Robert W. Maas

Accounting Basics: “Resident” Fundamentals Quiz

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Thank you for exploring the intricate details of residency in UK taxation. Armed with this knowledge, you’re better equipped for personal and corporate tax planning!

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