The key question in determining an individual’s liability to tax in the UK is whether or not he is resident here. It is perhaps surprising then, that the law on residence is unclear and there is no single statutory test. Instead, we must rely on a body of case law (which is of limited help since each case turns on its own very specific facts), a couple of ancillary statutory provisions, and HM Revenue and Customs’ guidance.

It is clear that if a person spends more than 182 days in the UK in a single tax year (6th April to the following 5th April) he is resident in that year.

A further, long-established principle is that if a person spends an average of more than 90 days a year in the UK he is also treated as being resident. This average used to be calculated over a rolling four year period, with the individual treated as UK resident from the beginning of the fifth year. Revised HMRC guidance issued at the end of December 2010 has reduced the period of calculation to three years, so that the individual is now UK resident from the beginning of the fourth year.

One may be forgiven for thinking that residence (or lack of it) can be established by a fairly simple daycounting exercise. Unfortunately it is not that straightforward, as the number of recent cases in the courts (many of which have made it into the national press) demonstrates.

Mr Gaines-Cooper’s case is the most widely reported. He left the UK to make his home in the Seychelles in 1976 and believed he had ceased to be UK resident from his departure. He visited the UK after his departure, but was apparently careful to stay below the 90 day threshold. HMRC guidance at that time stated that in calculating the number of days spent in the UK, days of arrival and departure would not usually be taken into account and Mr Gaines- Cooper says he relied on this. However, HMRC argued that this approach was not appropriate in his case and, further, that their guidance was not binding. The court has since held that taxpayers are entitled to rely on HMRC guidance in principle (although this has not helped Mr Gaines-Cooper so far).

HMRC withdrew IR20, the guidance at the heart of the Gaines-Cooper case, and replaced it with new guidance known as HMRC6 in April 2008. Perhaps unsurprisingly, given the court’s decision, HMRC6 has many caveats and warns that each case will be decided on its own merits, and that the guidance and examples cannot be relied on as applying to the circumstances of individual taxpayers.

It is clear that the approach to daycounting has changed: generally, all days on which the individual was in the UK at midnight now count. However, for the purposes of the 90 day averaging test, where an individual makes numerous short trips to the UK, HMRC say that they may count all days on which he was present in the UK (even those on which he left before midnight).

Remaining within the 182/90-day rules, however, is not enough, and different rules apply to individuals coming to the UK and those leaving, or trying to. Whilst spending more than 90 days a year on average in the UK will make you UK resident, staying under that limit will not necessarily make you non-resident. A taxpayer leaving the UK must also now demonstrate a ‘distinct break’ in the pattern of his life if he is to lose his UK resident status. HMRC seem to believe this means severing all ties with the UK and, although this is not necessarily correct legally, individuals who leave but retain ties in the UK (unless they are in genuine full time employment abroad) risk attack from an increasingly aggressive HMRC.

All this uncertainty leaves the individual taxpayer in an impossible position. It is his responsibility, under the selfassessment system, to report his own tax liability, yet there is no clear set of rules he can apply in order to work out whether or not he is UK resident for these purposes. In a world where it is increasingly common to move from one country to another for study, or work or lifestyle reasons, this is unacceptable. Tax advisers and their representative bodies have been lobbying for the introduction of a statutory residence test to resolve the uncertainty. This seems to have slipped from the Government’s agenda at present, but it is sorely needed.