Delay For The Statutory Residency Test

The proposed statutory residence test will now be delayed after draft legislation was omitted from the 2012 Finance Bill.

Consultation documents were issued earlier this year detailing plans to simplify the test employed by HM Revenue & Customs (HMRC) to determine an individual’s residence status for tax purposes, and many had expected legislation to be contained in the 2012 Finance Bill. Treasury sources have stated that details of the test were not included in the Fiancé Bill due to issues raised during the consultation process. It is now envisaged that the Statutory Residency Test will be included in the 2013 Finance Bill.

The current rules that determine an individual’s tax residence have long been criticised on the grounds of complexity and lack of clarity. The 2011Budget  saw the Government state that a new  statutory definition of tax residence would be introduced with the aim of creating clear rules to provide greater certainty for taxpayers which were simple to apply.

The draft finance bill includes provisions for imitative previously announced in the Budget and Autumn Statement. It also contains details of reliefs to be removed following consultation by the Office of Tax Simplification. Only 4 of the 36 tax reliefs earmarked for removal will now be retained.