UK Changes Tax Residence Requirements

In June 2011 the UK government released their long awaited consultation paper on tax residency which is intended to make it harder to declare non-resident status for tax purposes, and clarifies a number of substantive points with particular interest to expatriate residents in Spain and other countries.

The most significant development is a series of five connection factors that determine if the individual is deemed to be a UK resident, even if they spend substantially more time out of the UK than in the UK. These include family, accommodation, substantive UK work, UK presence in previous years, and spending more time in the UK than any other single country.

The new residency regime is currently expected to come into effect on the 6th of April 2012 to give current non-residents time to normalise their tax affairs with respect to ensuring that UK requirements are being met.

In line with other EU states such as Ireland, the new tax residency regime will also make it easier to become a UK tax resident even if the individual does not yet satisfy immigration requirements, and in combination with reciprocal tax agreements within the European Union aims to ensure that all UK-based taxable income is assessed in the UK.

Expatriate residents in Spain who return to the UK every year for extended periods of time now need to be aware that spending less than 6 months in the UK does not allow the individual to declare non-resident status, and moreover, the new tax regime will continue to assess an individual’s tax liability for 3 years after leaving the UK.

Further information about the new UK tax residency rules