I live outside the UK and I have been asked to check RDR3 to understand more about my UK tax residence status, but what is RDR3?
RDR3 is HMRC’s published guidance note which gives you information about the UK’s Statutory Residence Test.
If you are brave enough to review RDR3 you will see it has taken HMRC 105 pages of guidance in an attempt to decipher less than 20 pages of tax legislation.
Originally introduced in April 2013, the Statutory Residence Test sets out a series of tests and rules that establishes an individual’s UK tax residence status, and therefore helps to determine how much tax they must pay in the UK.
The Statutory Residence Test has four key components, namely:
- How much time an individual has spent in the UK (working or simply visiting): for example, if you have spent over 183 days in the UK in any given tax year, you will be deemed tax resident.
- Automatic overseas test: You will automatically be considered a non-resident if you have spent a significant amount of time outside the UK, for example fewer than 46 days in the UK or fewer than 91 days in the UK if you work full time abroad and were considered a non-resident in the previous three tax years.
- Automatic UK tests: Looks at which country your permanent home(s) are located, or whether you work a significant amount of time in the UK.
- Significant ties test: If you have significant ties in the UK (for example children), the criteria for determining your residence status will be based on the number of ties you have, combined with other factors including how much time you spent in the UK.
The information above is included as an overview only and determining your UK tax residence status is never straightforward.
There may be other considerations, such as Split Year Treatment, which could offer you additional tax advantages. However, failing to correctly declare and pay the correct amount of tax because you incorrectly assessed your tax residence status is dangerous and will probably lead to penalties.
We have created a more detailed explanation of the Statutory Residence Test which you should read, however you must always seek advice from a qualified tax consultant if you are unsure of your tax residence status.
You can request a free 15-minute consultation with a tax consultant from our network if you would like your general questions answered. Unless your situation is straight forward, in many cases this probably would not be sufficient to determine your tax residence status, but the consultant will also be able to offer a fee quotation to completing the Statutory Residence Test and ensure you know your UK tax responsibilities.
