Tax Residence and Full-Time Employees


Following a recent case,  the tax position for those working abroad full-time is still uncertain.
In the recent case of Davies and James, the Court of Appeal ruled that being in full-time employment abroad for the whole of the tax year was sufficient in itself to prevent UK residence for IT purposes. Prior to this, it was generally thought that some lessening of ties with the UK (such as property or other assets, or social connections) was necessary.
Crucial to the Court of Appeal's decision was para. 2.2 of IR20, the guidance given by HM Revenue & Customs (HMRC) on this subject. This states that an individual leaving the UK to work full-time abroad will be treated as neither resident nor ordinarily resident for IT purposes, provided:
·        the employment abroad lasts for at least a whole tax year;
·        any visits to the UK during this time total less than 183 days in any one tax year, and average less than 91 days per tax year;
From 6 April 2009, however, HMRC have replaced IR20 with new guidance, entitled HMRC 6. Although the paragraph dealing with full-time employment abroad (para. 8.5) is broadly similar to para. 2.2 of IR20, it is not clear whether para. 1.15.22 is also relevant in this situation. This states:
'You should always look at the pattern of your lifestyle when deciding whether you are resident in the UK […] Just because you leave the UK to live orwork abroad does not necessarily prove that you are no longer resident here if, for example, you keep connections in the UK such as property, economicinterests, available accommodation, and social activities or if you have
children in education here.'
It remains to be seen whether the impact of the updated guidance will be to circumvent the Court of Appeal's decision. Tax legislation does provide that 'living accommodation' available in the UK will not affect the residence status of those in full-time employment abroad: however, it is unclear if this still applies when the individual's family live in the accommodation.

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