Tax on foreign income - Working out your residence status

WelshPianist

Please can I ask for assistance working my UK residence status?. The HMRC website states:

You’re automatically resident if either:

• you spent 183 or more days in the UK in the tax year - My original flight date was supposed to be August 1st meaning I would have spent 118 days in the UK during the tax year but due to Covid, which caused delays in VISA applications, I wasn't able to fly until October 15th meaning I spent 192 days in the UK during the 2020-21 tax year.
• your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year - My only home was not in the UK given I moved to Bahrain but I did live in my parent's home in the UK for at least 91 days and spent at least 30 days there during the 2020-21 tax year.

You’re automatically non-resident if either:

• you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years) - I spent more than 16 days in the UK during the 2020-21 tax year.
• you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working - I have worked abroad full time since October but I didn't spend fewer than 91 days in the UK and more than 30 of them were spent working during the 2020-21 tax year.

Jeremy535897

You may be able to ignore days in the UK where there are exceptional circumstances:
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm11005
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm13200

WelshPianist

Jeremy535897

Thank you for bringing this to my attention! Even if I did technically spend less than 183 days in the UK due to exceptional circumstances, do the other points mean I would still be classes as a UK resident or a non-UK resident?

Jeremy535897

Let us assume you can show that you would have spent less than 183 days in the UK in 2020/21 but for exceptional reasons (delays in visa applications are not guaranteed to count as exceptional). If you can, you would not be automatically resident under the first two tests (as you have a home in Bahrain). You do not meet the automatic non-residence test that you mention.

The statutory residence test is more sophisticated than your post, and there are various other tests to consider. See 
https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

Even if you are resident in the UK for tax purposes under UK law, the UK Bahrain double tax agreement may determine that you are resident in Bahrain for the purposes of the agreement. See Article 4:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/235962/8550.pdf

WelshPianist

Jeremy535897 
Thank you. I had already been made aware of the double tax agreement but wasn't sure if it applied to this circumstance.

Residence (1) For the purposes of this Agreement, the term "resident of a Contracting State" means: (a) in the case of Bahrain, any individual who has a permanent home, his centre of vital interests, or habitual abode in Bahrain, and a company incorporated or having its place of effective management in Bahrain ... if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests); (b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode - I don't own and have never owned a home of my own back in the UK, but my family obviously live back in the UK and I would stay in their house if I ever went across to visit but my permanent home (where I spend most of my time) and career is now in Bahrain.

Jeremy535897

I don't think staying in your parent's home is an issue, although I suppose HMRC might argue the point if you had your own room there, used only by you, it could be a permanent home, but then your centre of vital interests would almost certainly be Bahrain, based on what you have said. You then look at the rest of the double tax agreement, and examine each article that describes income or gains that you have. For example, employment income can only be taxed in the UK if the employment is exercised in the UK, and even then there are further conditions (Article 14).

WelshPianist

Jeremy535897 

Automatic overseas tests - This would class me as a UK resident.Automatic UK tests - Apart from 3.1 (due to 'exceptional circumstances' - the borders were only open to Bahrain nationals at this point due to Covid) - This would class me as a UK resident.Sufficient ties test - I have a family, accommodation (I'd stay with parents if I ever went home to visit), and 90 day tie. I don't have a work tie as I now work in Bahrain.I do qualify for Split year treatment under Case 1 - Starting full-time work overseas because I would:* be UK resident for the tax year in question (2020-21)
* be UK resident for the previous tax year (whether or not this was also a split year)
* be non-UK resident in the following tax year, because they meet the third automatic overseas test
* satisfy the overseas work criteria during a relevant period.But even taken this into consideration, how does the double tax agreement affect my circumstances?

 

Jeremy535897

The double tax agreement treats you as a resident of Bahrain, which means that even if you are UK resident under UK domestic law, the UK cannot tax you on, for example, employment income from a job exercised in Bahrain (or anywhere else outside the UK).