Statutory Residence Test (SRT)

The Statutory Residence Test (SRT) is a set of rules introduced by HMRC to determine an individual’s tax residence status in the UK. It replaced the previous rules based on common law and provides a clear framework for determining tax residency.

The purpose of the Statutory Residence Test is to provide clarity and certainty in determining an individual’s tax residence status. It ensures that individuals are subject to the appropriate tax rules based on their residency status.

The Statutory Residence Test considers various factors to determine an individual’s tax residence status. These factors include the number of days spent in the UK, connections to the UK, and certain defined circumstances.

The Statutory Residence Test categorizes individuals into three main categories:

a. UK Resident: 
An individual who meets the criteria for being a UK resident for tax purposes.

b. UK Non-Resident: 
An individual who does not meet the criteria for being a UK resident for tax purposes.

c. Split Year Treatment: 
An individual who transitions from being a UK resident to non-resident or vice versa during a tax year.

The criteria for determining tax residence under the Statutory Residence Test include:

The number of days spent in the United Kingdom within a fiscal year.
Individual connection reasons, such as owning a house, family, or working in the United Kingdom.
The presence of breaks from the United Kingdom.
The individual’s presence in the UK for employment purposes.
The amount of links an individual has to the United Kingdom, including family, housing, and employment relationships.

Tax residence is determined by evaluating the specific circumstances and factors outlined in the Statutory Residence Test. The individual’s presence, connections, and ties to the UK are assessed to determine their tax residence status.

Being a UK resident for tax purposes means that an individual is subject to UK tax on their worldwide income and gains. They are also eligible to claim certain tax reliefs and allowances available to UK residents.

Being a UK non-resident for tax purposes implies that an individual is normally only liable for UK tax on income and profits derived in the UK. They may also be subject to tax restrictions in their home country.

Individuals can determine their tax residence status by evaluating their circumstances against the criteria outlined in the Statutory Residence Test. HMRC provides guidance and tools to assist individuals in making this determination.

In certain circumstances, the Statutory Residence Test may be overridden by specific double tax treaties or other legislative provisions. It is important for individuals to seek professional advice if they believe their situation involves complex residency issues.