The residency test was introduced by the UK Government last year in the Finance Bill 2013 and was heralded at the time as having made a previously complex area of the tax code, much simpler.
Damian Bloom, a tax expert and partner in the private client team at law firm Berwin Leighton Paisner, said the test was hailed as a positive step in the long term simplification of the UK tax system.
“However in retrospect it looks more like a shining island of logic in a sea of complexity,” said Bloom.
“The light shed by that lonely beacon has since been dimmed by the 2013 introduction of the new tax on UK property held by offshore structures, and any remaining slivers have been firmly snuffed out by the just released consultation document on the introduction of tax on non-UK resident owners of UK property. Wealthy individuals will still be drawn to London, but they might be put through the wringer to get here.”
Bloom added that the test had provided clients with a “welcome degree of certainty in many simple cases”, but that, in more complex cases, there was still confusion.
Furthermore, Bloom argues the tax competitiveness of the UK for a non-UK individual derives from the ability to live in the UK while limiting UK tax on non-UK assets, but that the complexity of the UK tax system means detailed planning is a must.
“The more planning you do before you arrive, the longer you can (entirely legitimately) live in the UK before falling fully within the UK tax net,” said Bloom. “As any seasoned traveller will tell you, plan your route before you leave home.”