The UK has a detailed Statutory Residence Test to determine someone’s tax residency position. Under this, detailed and accurate record keeping is essential to work out someone’s residency position. A small error, for example in counting days, can make a huge difference in terms of tax.
The onus is on the taxpayer to provide evidence to support their tax residence position so record-keeping is extremely important.
What sort of records should you keep?
Whereabouts
A taxpayer’s whereabouts is the one of the key criteria under the statutory residence test.
It is important to keep travel schedules, travel booking information, tickets and boarding cards, visa work permit applications, contracts of employment, rent agreements, mobile phone records and bank / credit card statements.
Work days
It can also be important to demonstrate where a taxpayer has carried out their work.
The statutory residence test defines a work day as a day when the taxpayer does more than three hours work. A work diary / calendar or timesheet could help to demonstrate this. The taxpayer should try to ensure that their work diary is sufficiently detailed, maybe reflecting hours worked and the nature of the work and periods of annual leave or sick leave. Where a diary is electronic, it is important that it can continue to be accessed some time later. Problems can occur when a taxpayer has left a job or software is changed. Similarly, it is helpful to maintain a personal diary to show when the taxpayer has not worked.
Home
It may be important under statutory residence test to demonstrate whether the taxpayer had a home in the UK or abroad.
HMRC will expect a taxpayer to produce evidence that establishes their presence at a particular home such as where their spouse and children live, where their post is addressed, whether they use the address for official purposes such as the electoral register, where they are registered with the doctor and payment of local rates.
Contact Us
Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
