It’s easy to be caught out by the second automatic UK test.
Most advisers are aware of the workings of the ‘sufficient ties’ test in determining whether an individual is resident in the UK. But it’s a mistake to leap into looking at ties and day-counting without first considering the ‘automatic UK tests’. In particular, it’s easy to be caught out by the ‘second automatic UK test’ set out at FA 2013 Sch 45 para 8.
Eric used to be resident in the UK until he retired abroad some years ago. He now has just one tie to the UK – he’s kept the London pied-a-terre which he bought a long time ago when he was still UK resident. That and his magnificent beachfront tax haven home are the only residential properties he now owns. With just one tie, he knows he can spend up to 183 midnights in the UK, but he’s always well under that: he’s in the UK for not much more than a couple of months in total each year. So far, so good.
At the end of February 2025, he sold his tax haven home and bought an even bigger one adjoining an even sandier beach. He left his people to sort out the move and took a skiing break while they did so, returning in the middle of March.
Eric was incredulous to learn that he would be a tax resident of the UK for 2024/25.
Why? Look at the requirements of the second automatic test.
Does Eric have a home in the UK during all or part of 2024/25? Yes.
Is that home one where Eric spends ‘a sufficient amount of time’ in 2024/25 (meaning – were there at least 30 days when he was present there, regardless of how short the visit)? Yes.
Is there a period of at least 91 consecutive days in respect of which the following conditions are met?
(a) The 91-day period occurs while Eric owns the home.
(b) At least 30 days of that 91-day period fall within 2024/25.
(c) Throughout that 91-day period either (i) Eric has no home overseas or (ii) each of Eric’s overseas homes is one in which Eric is present on fewer than 30 days in 2024/25.
Yes. The period 1 March 2025 to 31 May 2025 meets all those criteria.
It’s not relevant that Eric didn’t set foot in the UK during that period, nor that both his old and his new tax haven homes are ones in which he has spent (or will spend) the vast majority of his time in every tax year. It doesn’t matter that if he had been in the habit of regularly visiting a second overseas home, the answer may have been different. Nor even that if everything had happened a couple of weeks earlier or a couple of weeks later, he wouldn’t have been caught by the rule (in the first case because Eric would have been in the new home on enough days in 2024/25 and in the second because the critical 91-day period would have started less than 30 days before the end of the tax year).
None of that is relevant, except that the fact that the problem could readily be avoided with a modicum of planning may have unwelcome implications for an adviser’s exposure to a negligence claim.
However, all may not be lost. Is the pied-a-terre really a ‘home’? The legislation provides that a place which is ‘nothing more than a holiday home or temporary retreat (or something similar) does not count as a home’. HMRC’s published guidance (Residence and FIG Regime Manual at RFIG22120 et seq) is predictably ambivalent, but it may be possible to argue that a property visited for only a couple of months a year qualifies as a ‘holiday home’ and thus not a ‘home’ for the purposes of the statutory residence test. However, Eric’s previous use of the property while UK-resident and his propensity to mix business with pleasure on his visits to the UK may weaken his case.
Far better, however, to keep the bear-trap in mind and avoid the argument!
Home >Articles > A statutory residence test bear-trap
A statutory residence test bear-trap
It’s easy to be caught out by the second automatic UK test.
Most advisers are aware of the workings of the ‘sufficient ties’ test in determining whether an individual is resident in the UK. But it’s a mistake to leap into looking at ties and day-counting without first considering the ‘automatic UK tests’. In particular, it’s easy to be caught out by the ‘second automatic UK test’ set out at FA 2013 Sch 45 para 8.
Eric used to be resident in the UK until he retired abroad some years ago. He now has just one tie to the UK – he’s kept the London pied-a-terre which he bought a long time ago when he was still UK resident. That and his magnificent beachfront tax haven home are the only residential properties he now owns. With just one tie, he knows he can spend up to 183 midnights in the UK, but he’s always well under that: he’s in the UK for not much more than a couple of months in total each year. So far, so good.
At the end of February 2025, he sold his tax haven home and bought an even bigger one adjoining an even sandier beach. He left his people to sort out the move and took a skiing break while they did so, returning in the middle of March.
Eric was incredulous to learn that he would be a tax resident of the UK for 2024/25.
Why? Look at the requirements of the second automatic test.
Does Eric have a home in the UK during all or part of 2024/25? Yes.
Is that home one where Eric spends ‘a sufficient amount of time’ in 2024/25 (meaning – were there at least 30 days when he was present there, regardless of how short the visit)? Yes.
Is there a period of at least 91 consecutive days in respect of which the following conditions are met?
(a) The 91-day period occurs while Eric owns the home.
(b) At least 30 days of that 91-day period fall within 2024/25.
(c) Throughout that 91-day period either (i) Eric has no home overseas or (ii) each of Eric’s overseas homes is one in which Eric is present on fewer than 30 days in 2024/25.
Yes. The period 1 March 2025 to 31 May 2025 meets all those criteria.
It’s not relevant that Eric didn’t set foot in the UK during that period, nor that both his old and his new tax haven homes are ones in which he has spent (or will spend) the vast majority of his time in every tax year. It doesn’t matter that if he had been in the habit of regularly visiting a second overseas home, the answer may have been different. Nor even that if everything had happened a couple of weeks earlier or a couple of weeks later, he wouldn’t have been caught by the rule (in the first case because Eric would have been in the new home on enough days in 2024/25 and in the second because the critical 91-day period would have started less than 30 days before the end of the tax year).
None of that is relevant, except that the fact that the problem could readily be avoided with a modicum of planning may have unwelcome implications for an adviser’s exposure to a negligence claim.
However, all may not be lost. Is the pied-a-terre really a ‘home’? The legislation provides that a place which is ‘nothing more than a holiday home or temporary retreat (or something similar) does not count as a home’. HMRC’s published guidance (Residence and FIG Regime Manual at RFIG22120 et seq) is predictably ambivalent, but it may be possible to argue that a property visited for only a couple of months a year qualifies as a ‘holiday home’ and thus not a ‘home’ for the purposes of the statutory residence test. However, Eric’s previous use of the property while UK-resident and his propensity to mix business with pleasure on his visits to the UK may weaken his case.
Far better, however, to keep the bear-trap in mind and avoid the argument!
