UK Fact-File Part 2:
Individual Business Domestic Taxation

2.1 UK Individual Business Tax Residence Rules

The general rule for determining UK tax residency is that if you spend 183 days or more in the UK in a tax year, or after four years your visits average 91 days or more a year over those years, you will be classed as a UK resident for tax purposes.

For individuals, liability for UK taxes will depend on the length of time an individual is resident in the UK. Someone who is deemed as a UK resident will pay tax on income derived in the UK and worldwide.

The rules governing tax residence for individuals have been significantly tightened in recent years, particularly following some high-profile court cases; extensive HMRC guidance is available, but it is confusing and potentially misleading. The advice of an expert accountant is beneficial. For a domiciled Brit, in order to preserve non-residence, it is necessary to break most UK ties in a fairly fundamental way.

Until April 2008, a person deemed resident in the UK but not domiciled in the country could benefit from a favourable tax regime, whereby UK tax on overseas gains and income was only payable where such income was remitted to the UK. In response to criticism over the number of very wealthy ‘non-doms’ living in the UK, and benefiting from their residence, whilst paying very little in the way of tax, the government amended the rules in its 2008 Finance Act.

From April 2008, where a non-dom has been resident in the UK for seven of the previous ten years, they can only benefit from the ‘remittance basis’ of taxation on payment of a GBP30,000; alternatively, overseas gains and income will become taxable in the UK. A non-dom resident for fewer than ten years can remain subject to the remittance basis if they are prepared to sacrifice their UK personal allowances (subject to a GBP2,000 minimum). HMRC provides further information on this here: http://www.hmrc.gov.uk/nonresidents/coming_to_the_uk.htm