A statutory residence test

Among the many residual disappointments from the trainwreck in policy making to the residence and remittance basis rules, which we have endured over the past 6 months, is the absence of the proposed introduction of a statute based test for the tax residency status of individuals.

Indeed, when it comes to the possible changes which could have been made, and which would have been generally welcomed, there is a sad predictability that a government which has legislated more than any other in history could not manage such an easy win.

Not to be deterred, the Lib Dems have tabled an amendment to the current Finance Bill to introduce such a test. We doubt Dr Cable and his colleagues have any expectancy that the amendment will succeed, but the debate which the amendment receives might prove to be of interest.

Whilst the obvious, and certainly the least contentious, route to take would be to codify the 91 and 183 day tests, the Lib Dem proposal is, rather, for the introduction of an entirely new test, being the same test which applies in the USA. We have no recollection of this ever previously being floated as a suitable test for the UK.

Anecdotally, at least, the test does not seem to work well in the USA and is routinely manipulated by short term visitors to the USA, giving the USA a soft regime which could, in the broadest sense, be seen as a sop to foreigners not too far removed from that which the UK offers with the remittance basis. Given that such an interpretation is wholly at odds with the Lib Dem's stated policy, it does seem somewhat curious for them to be proposing the adoption of such a test.