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CIOT Calls For Statutory UK Residence Test

by Robert Lee,, London

27 November 2007

The Chartered Institute of Taxation (CIOT) has recommended that a statutory and comprehensive residence test should be introduced in the UK, and that this should be part of a proper reform package, following the announcement in the Pre-Budget Report of changes to the residence and domicile rules.

“In the present era of great personal mobility in work and personal life it is essential that an individual can know, with certainty, what circumstances will render him resident in the UK," stated Emma Chamberlain, CIOT spokeswoman.

"If an individual cannot do this, he or she will err on the side of caution and limit or avoid visits to the UK. This will reduce spending in the UK and diminish business activity here. As a result the economy will suffer and there will be loss of tax revenue. Moreover it is unacceptable that many individuals who leave this country to work abroad cannot know with certainty whether or not they are still UK resident," she argued.

CIOT described the law determining whether an individual is resident in the UK as "a mess", and mainly based on very old case law rather than any clear statutory statement of the rules.

“The UK is alone in having a test which can make someone resident on as little as 90 days here," Chamberlain continued. "A business traveller who comes to London for a meeting, stays overnight and leaves the next day may well spend less than 24 hours in the UK on each occasion. Whereas previously this did not count at all, now it counts as two days. This allows business travellers who are not from a country which has an appropriate double tax treaty only 45 visits to the UK a year, fewer than 4 a month, or even fewer if they also have the odd holiday here as well. This will have a genuine and really serious impact on London and other major UK cities as places to do business."

The CIOT’s suggested test would be based solely on the number of days in the tax year that an individual was present in the UK and could be similar to that used in the US and Ireland. It has proposed taking a rolling average over three years, so that an individual could spend up to 120 days here each tax year, including days of arrival and departure.

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