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Finance Act 2013

Type Public General Act

Publication 2013-07-17

Last updated 2025-12-16

State In force

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(6A) The trusts on which the settled property is held are not to be treated as falling outside subsection (2) by reason only of— (a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (6B) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the period in question. (6C) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April. (6D) The Treasury may by order made by statutory instrument— (a) specify circumstances in which subsection (6A)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (6B). (6E) An order under subsection (6D) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (6F) A statutory instrument containing an order under subsection (6D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(6) For subsection (8) substitute—

(8) In this section— - “SSCBA 1992” means the Social Security Contributions and Benefits Act 1992, - “SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992, and - “WRA 2012” means the Welfare Reform Act 2012.

(7) In the heading, for the words following “person” substitute “ expected to fall within the definition of “disabled person” ”.

8

(1) Section 89B (meaning of “disabled person's interest”) is amended as follows.

(2) For subsection (2) substitute—

(2) In subsection (1)(c) “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.

(3) After that subsection insert—

(2A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (1)(d)(v) has effect as if for “A's life” there were substituted “ the period during which the income from the property is held on trust for A ”.

9

(1) The amendments made by paragraphs 2 to 8 have effect in relation to property transferred into settlement on or after 8 April 2013.

(2) Nothing in paragraphs 6 to 8 is to be read as preventing property transferred into a relevant settlement on or after 8 April 2013 from being property to which section 89 or 89A of IHTA 1984 applies.

10

(1) In section 89B (meaning of “disabled person's interest”), in subsection (1)(c) after “2006” insert “ if the trusts on which the settled property is held secure that, if any of the settled property is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person ”.

(2) After that section insert—

(89C) (1) The trusts on which settled property is held are not to be treated for the purposes of section 89B(1)(c) or (d) (meaning of “disabled person's interest”: cases involving an interest in possession) as failing to secure that the settled property is applied for the benefit of a beneficiary by reason only of— (a) the trustees' having powers that enable them to apply otherwise than for the benefit of the beneficiary amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (2) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the period in question. (3) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April. (4) The Treasury may by order made by statutory instrument— (a) specify circumstances in which subsection (1)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (2). (5) An order under subsection (4) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (6) A statutory instrument containing an order under subsection (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(3) The amendments made by this paragraph have effect in relation to property transferred into settlement on or after the day on which this Act is passed.

(4) Nothing in this paragraph is to be read as preventing property transferred into a settlement to which sub-paragraph (5) applies from being settled property for the purposes of section 89B(1)(c) or (d) of IHTA 1984.

(5) This sub-paragraph applies to a settlement—

(a) created before the day on which this Act is passed the trusts of which have not been altered on or after that day, or

(b) arising on or after the day on which this Act is passed under the will of a testator, if—

(i) the will was executed before the day on which this Act is passed and its provisions, so far as relating to the settlement, have not been altered on or after that day, or

(ii) the will was executed or confirmed on or after the day on which this Act is passed and its provisions, so far as relating to the settlement, are in the same terms as those contained in a will executed by the same testator before that day.

Taxation of Chargeable Gains Act 1992

11

TCGA 1992 is amended as follows.

12

(1) Section 169D (exceptions to rules on gifts to settlor-interested settlements etc) is amended as follows.

(2) For subsection (3) substitute—

(3) The first condition is that, immediately after the making of the disposal, the settled property is held on trusts which secure that, during the lifetime of a disabled person— (a) if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and (b) either— (i) the disabled person is entitled to all of the income (if there is any) arising from any of the property, or (ii) if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit.

(3) After subsection (4) insert—

(4A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (3) has effect as if the reference to the lifetime of a disabled person were a reference to the period during which the income is held on trust for the disabled person. (4B) The trusts on which the settled property is held are not to be treated as falling outside subsection (3) by reason only of— (a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (4C) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the tax year in question. (4D) The Treasury may by order— (a) specify circumstances in which subsection (4B)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (4C). (4E) An order under subsection (4D) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (4F) A statutory instrument containing an order under subsection (4D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(4) For subsections (7) to (9) substitute—

(7) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.

(5) Omit subsection (10).

(6) The amendments made by this paragraph have effect in relation to disposals to the trustees of a settlement on or after 8 April 2013.

(7) But if the settlement is a relevant settlement, nothing in this paragraph is to be read as preventing section 169D(2) of TCGA 1992 from applying in relation to the disposal.

13

(1) Paragraph 1 of Schedule 1 (application of exempt amount and reporting limits in cases involving settled property) is amended as follows.

(2) In sub-paragraph (1)—

(a) for “mentally disabled person or a person in receipt of attendance allowance or of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate” substitute “ disabled person ”, and

(b) for paragraphs (a) and (b) substitute—

(a) if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and (b) either— (i) the disabled person is entitled to all of the income (if there is any) arising from any of the property, or (ii) if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit,

(3) After that sub-paragraph insert—

(1A) The trusts on which settled property is held are not to be treated as falling outside sub-paragraph (1) by reason only of— (a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (1B) For the purposes of this paragraph, the “annual limit” for a tax year is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the tax year in question. (1C) The Treasury may by order— (a) specify circumstances in which sub-paragraph (1A)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in sub-paragraph (1B). (1D) An order under sub-paragraph (1C) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (1E) A statutory instrument containing an order under sub-paragraph (1C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(4) In sub-paragraph (2), for the words from the beginning to “that sub-paragraph” substitute “ The reference in sub-paragraph (1) ”.

(5) In sub-paragraph (6), for the definitions of “mentally disabled person”, “attendance allowance” and “disability living allowance” substitute—

“disabled person” has the meaning given by Schedule 1A to the Finance Act 2005; and

(6) The amendments made by this paragraph have effect in relation to the tax year 2013-14 and subsequent tax years.

(7) But if the settlement is a relevant settlement, nothing in this paragraph is to be read as preventing sections 3(1) to (5C) and 3A of TCGA 1992 from applying in relation to the settlement as provided by paragraph 1(1) of Schedule 1 to that Act.

Finance Act 2005

14

FA 2005 is amended as follows.

15

(1) Section 34 (disabled persons) is amended as follows.

(2) In subsection (2), for paragraph (b) substitute—

(b) either— (i) that the disabled person is entitled to all the income (if there is any) arising from any of the property, or (ii) if any such income is applied for the benefit of a beneficiary, it is applied for the benefit of the disabled person.

(3) For subsection (3) substitute—

(3) The trusts on which property is held are not to be treated as failing to secure that the conditions in subsection (2) are met by reason only of— (a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (3B) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the tax year in question. (3C) The Treasury may by order made by statutory instrument— (a) specify circumstances in which subsection (3)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (3B). (3D) An order under subsection (3C) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (3E) A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

16

(1) Section 35 (relevant minors) is amended as follows.

(2) For subsection (3)(c)(ii) substitute—

(ii) if any such income is applied for the benefit of a beneficiary, it is applied for the benefit of the relevant minor.

(3) For subsection (4) substitute—

(4) Trusts to which subsection (2) applies are not to be treated as failing to secure that the conditions in subsection (3) are met by reason only of— (a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the relevant minor amounts (whether consisting of income or capital, or both) not exceeding the annual limit, (b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement), (c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section, (d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland), (e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or (f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e). (4B) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts— (a) £3,000, and (b) 3% of the amount that is the maximum value of the settled property during the tax year in question. (4C) The Treasury may by order made by statutory instrument— (a) specify circumstances in which subsection (4)(a) is, or is not, to apply in relation to a trust, and (b) amend the definition of “the annual limit” in subsection (4B). (4D) An order under subsection (4C) may— (a) make different provision for different cases, and (b) contain transitional and saving provision. (4E) A statutory instrument containing an order under subsection (4C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

17

For section 38 substitute—

(38) In this Chapter “disabled person” has the meaning given by Schedule 1A.

18

The amendments made by paragraphs 15 to 17 have effect for the tax year 2013-14 and subsequent tax years.

19

After Schedule 1 insert—

SCHEDULE 1A (1) “Disabled person” means— (a) a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of administering his or her property or managing his or her affairs, (b) a person in receipt of attendance allowance, (c) a person in receipt of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate, (d) a person in receipt of personal independence payment by virtue of entitlement to the daily living component, (e) a person in receipt of an increased disablement pension, (f) a person in receipt of constant attendance allowance, or (g) a person in receipt of armed forces independence payment. (2) A person is to be treated as a disabled person under paragraph 1(b) if he or she satisfies HMRC that he or she would be entitled to receive attendance allowance but for— (a) the conditions as to residence and presence prescribed under section 64(1) of SSCBA 1992 or section 64(1) of SSCB(NI)A 1992, (b) provision made by regulations under section 67(1) or (2) of SSCBA 1992 or section 67(1) or (2) of SSCB(NI)A 1992 (non-satisfaction of conditions for attendance allowance where person is undergoing treatment for renal failure in hospital or is provided with certain accommodation), or (c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension). (3) A person is to be treated as a disabled person under paragraph 1(c) if he or she satisfies HMRC that he or she would be entitled to receive a disability living allowance by virtue of entitlement to the care component at the highest or middle rate but for— (a) the conditions as to residence and presence prescribed under section 71(6) of SSCBA 1992 or section 71(6) of SSCB(NI)A 1992, (b) provision made by regulations under section 72(8) of SSCBA 1992 or section 72(8) of SSCB(NI)A 1992 (no payment of disability allowance for persons for whom certain accommodation is provided), or (c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension). (4) A person is to be treated as a disabled person under paragraph 1(d) if he or she satisfies HMRC that he or she would be entitled to receive personal independence payment by virtue of entitlement to the daily living component but for— (a) the conditions as to residence and presence prescribed under section 77(3) of WRA 2012 or the corresponding provision having effect in Northern Ireland, (b) provision made by regulations under section 85 of WRA 2012 (exclusion of certain care home residents) or the corresponding provision having effect in Northern Ireland, (c) provision made by regulations under section 86 of WRA 2012 (exclusion of certain hospital in-patients) or the corresponding provision having effect in Northern Ireland, or (d) section 87 of WRA 2012 (exclusion of prisoners and detainees) or the corresponding provision having effect in Northern Ireland. (5) A person is to be treated as a disabled person under paragraph 1(e) if he or she satisfies HMRC that he or she would be entitled to receive an increased disablement pension but for— (a) conditions as to residence and presence that have effect in relation to increased disablement pension by virtue of regulations under section 104(3) of SSCBA 1992 or section 104(3) of SSCB(NI)A 1992 (application of attendance allowance provisions), (b) provision made under section 67(1) or (2) of SSCBA 1992 or section 67(1) or (2) of SSCB(NI)A 1992 (non-satisfaction of conditions for attendance allowance where person is undergoing treatment for renal failure in hospital or is provided with certain accommodation) that has effect in relation to increased disablement pension by virtue of such regulations, or (c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension). (6) A person is to be treated as a disabled person under paragraph 1(f) if he or she satisfies HMRC that he or she would be entitled to receive constant attendance allowance but for— (a) article 61 (residence outside United Kingdom) or article 64 (maintenance in hospital or institution) of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686), or (b) article 53 (maintenance in hospital or institution) of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606). (7) A person is to be treated as a disabled person under paragraph 1(g) if he or she satisfies HMRC that he or she would be entitled to receive armed forces independence payment but for article 42 of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011 (S.I. 2011/517) (cessation of payment on admission to Royal Hospital, Chelsea). (8) In this Schedule— - “armed forces independence payment” means armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Compensation) Act 2004, - “attendance allowance” means an allowance under section 64 of SSCBA 1992 or section 64 of SSCB(NI)A 1992, - “constant attendance allowance” means an allowance under— 1. article 14 of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686), or 2. article 8 of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606), - “disability living allowance” means a disability living allowance under section 71 of SSCBA 1992 or section 71 of SSCB(NI)A 1992, - “HMRC” means Her Majesty's Revenue and Customs, - “increased disablement pension” means an increase of disablement pension under— 1. section 104 of SSCBA 1992, or 2. section 104 of SSCB(NI)A 1992, - “personal independence payment” means personal independence payment under— 1. WRA 2012, or 2. the corresponding provision having effect in Northern Ireland, - “SSCBA 1992” means the Social Security Contributions and Benefits Act 1992, - “SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992, - “WRA 2012” means the Welfare Reform Act 2012.

Interpretation: relevant settlement

20

(1) In this Schedule, “relevant settlement” means—

(a) a settlement created before 8 April 2013 the trusts of which have not been altered on or after that date, or

(b) a settlement arising on or after 8 April 2013 under the will of a testator, if—

(i) the will was executed before 8 April 2013 and its provisions, so far as relating to the settlement, have not been altered on or after that date, or

(ii) the will was executed or confirmed on or after 8 April 2013 and its provisions, so far as relating to the settlement, are in the same terms as those contained in a will executed by the same testator before that date.

(2) In this Schedule a reference to a will includes a reference to a codicil.

SCHEDULE 45

PART 1 — The rules

Introduction

1

(1) This Part of this Schedule sets out the rules for determining for the purposes of relevant tax whether individuals are resident or not resident in the UK.

(2) The rules are referred to collectively as “the statutory residence test”.

(3) The rules do not apply in determining for the purposes of relevant tax whether individuals are resident or not resident in England, Wales, Scotland or Northern Ireland specifically (rather than in the UK as a whole).

(4) “Relevant tax” means—

(a) income tax,

(b) capital gains tax, and

(5) Key concepts used in the rules are defined in Part 2 of this Schedule.

Interpretation of enactments

2

(1) In enactments relating to relevant tax, a reference to being resident (or not resident) in the UK is, in the case of individuals, a reference to being resident (or not resident) in the UK in accordance with the statutory residence test.

(2) Sub-paragraph (1) applies even if the reference relates to the tax liability of an actual or deemed person that is not an individual (for example, where the liability of another person depends on the residence status of an individual).

(3) An individual who, in accordance with the statutory residence test, is resident (or not resident) in the UK “for” a tax year is taken for the purposes of any enactment relating to relevant tax to be resident (or not resident) there at all times in that tax year.

(4) But see Part 3 of this Schedule (split year treatment) for cases where the effect of sub-paragraph (3) is relaxed in certain circumstances.

(5) This Schedule has effect subject to any express provision to the contrary in (or falling to be recognised and acknowledged in law by virtue of) any enactment.

The basic rule

3

An individual (“P”) is resident in the UK for a tax year (“year X”) if—

(a) the automatic residence test is met for that year, or

(b) the sufficient ties test is met for that year.

4

If neither of those tests is met for that year, P is not resident in the UK for that year.

The automatic residence test

5

The automatic residence test is met for year X if P meets—

(a) at least one of the automatic UK tests, and

(b) none of the automatic overseas tests.

The automatic UK tests

6

There are 4 automatic UK tests.

7

The first automatic UK test is that P spends at least 183 days in the UK in year X.

8

(1) The second automatic UK test is that—

(a) P has a home in the UK during all or part of year X,

(b) that home is one where P spends a sufficient amount of time in year X, and

(i) the 91-day period in question occurs while P has that home,

(ii) at least 30 days of that 91-day period fall within year X, and

(iii) throughout that 91-day period, condition A or condition B is met or a combination of those conditions is met.

(2) Condition A is that P has no home overseas.

(3) Condition B is that—

(a) P has one or more homes overseas, but

(b) each of those homes is a home where P spends no more than a permitted amount of time in year X.

(4) In relation to a home of P's in the UK, P “spends a sufficient amount of time” there in year X if there are at least 30 days in year X when P is present there on that day for at least some of the time (no matter how short a time).

(5) In relation to a home of P's overseas, P “spends no more than a permitted amount of time” there in year X if there are fewer than 30 days in year X when P is present there on that day for at least some of the time (no matter how short a time).

(6) In sub-paragraphs (4) and (5)—

(a) a reference to 30 days is to 30 days in aggregate, whether the days are consecutive or intermittent, and

(b) a reference to P being present at the home is to P being present there at a time when it is a home of P's (so presence there on any other occasion, for example to look round the property with a view to buying it, is to be disregarded).

(7) Sub-paragraph (1)(c) is satisfied so long as there is a period of 91 days in respect of which the conditions described there are met, even if those conditions are in fact met for longer than that.

(8) If P has more than one home in the UK—

(a) each of those homes must be looked at separately to see if the second automatic UK test is met, and

(b) the second automatic UK test is then met so long as it is met in relation to at least one of those homes.

9

(1) The third automatic UK test is that—

(a) P works sufficient hours in the UK, as assessed over a period of 365 days,

(b) during that period, there are no significant breaks from UK work,

(d) more than 75% of the total number of days in the 365-day period on which P does more than 3 hours' work are days on which P does more than 3 hours' work in the UK, and

(e) at least one day which falls in both that period and year X is a day on which P does more than 3 hours' work in the UK.

(2) Take the following steps to work out, for any given period of 365 days, whether P works “sufficient hours in the UK” as assessed over that period—

Step 1 Identify any days in the period on which P does more than 3 hours' work overseas, including ones on which P also does work in the UK on the same day. The days so identified are referred to as “disregarded days”.

Step 2 Add up (for all employments held and trades carried on by P) the total number of hours that P works in the UK during the period, but ignoring any hours that P works in the UK on disregarded days. The result is referred to as P's “net UK hours”.

Step 3 Subtract from 365—the total number of disregarded days, andany days that are allowed to be subtracted, in accordance with the rules in paragraph 28 of this Schedule, to take account of periods of leave and gaps between employments.The result is referred to as the “reference period”.

Step 4 Divide the reference period by 7. If the answer is more than 1 and is not a whole number, round down to the nearest whole number. If the answer is less than 1, round up to 1.

Step 5 Divide P's net UK hours by the number resulting from step 4.If the answer is 35 or more, P is considered to work “sufficient hours in the UK” as assessed over the 365-day period in question.

(3) This paragraph does not apply to P if—

(a) P has a relevant job on board a vehicle, aircraft or ship at any time in year X, and

(b) at least 6 of the trips that P makes in year X as part of that job are cross-border trips that either begin in the UK, end in the UK or begin and end in the UK.

10

(1) The fourth automatic UK test is that—

(a) P dies in year X,

(b) for each of the previous 3 tax years, P was resident in the UK by virtue of meeting the automatic residence test,

(c) even assuming P were not resident in the UK for year X, the tax year preceding year X would not be a split year as respects P (see Part 3 of this Schedule),

(d) when P died, either—

(i) P's home was in the UK, or

(ii) P had more than one home and at least one of them was in the UK, and

(e) if P had a home overseas during all or part of year X, P did not spend a sufficient amount of time there in year X.

(2) In relation to a home of P's overseas, P “spent a sufficient amount of time” there in year X if—

(a) there were at least 30 days in year X when P was present there on that day for at least some of the time (no matter how short a time), or

(b) P was present there for at least some of the time (no matter how short a time) on each day of year X up to and including the day on which P died.

(3) In sub-paragraph (2)—

(a) the reference to 30 days is to 30 days in aggregate, whether the days were consecutive or intermittent, and

(b) the reference to P being present at the home is to P being present there at a time when it was a home of P's.

(4) If P had more than one home overseas—

(a) each of those homes must be looked at separately to see if the requirement of sub-paragraph (1)(e) is met, and

(b) that requirement is then met so long as it is met in relation to each of them.

The automatic overseas tests

11

There are 5 automatic overseas tests.

12

The first automatic overseas test is that—

(a) P was resident in the UK for one or more of the 3 tax years preceding year X,

(b) the number of days in year X that P spends in the UK is less than 16, and

13

The second automatic overseas test is that—

(a) P was resident in the UK for none of the 3 tax years preceding year X, and

(b) the number of days that P spends in the UK in year X is less than 46.

14

(1) The third automatic overseas test is that—

(a) P works sufficient hours overseas, as assessed over year X,

(b) during year X, there are no significant breaks from overseas work,

(d) the number of days in year X falling within sub-paragraph (2) is less than 91.

(2) A day falls within this sub-paragraph if—

(a) it is a day spent by P in the UK, but

(b) it is not a day that is treated under paragraph 23(4) as a day spent by P in the UK.

(3) Take the following steps to work out whether P works “sufficient hours overseas” as assessed over year X—

Step 1 Identify any days in year X on which P does more than 3 hours' work in the UK, including ones on which P also does work overseas on the same day. The days so identified are referred to as “disregarded days”.

Step 2 Add up (for all employments held and trades carried on by P) the total number of hours that P works overseas in year X, but ignoring any hours that P works overseas on disregarded days. The result is referred to as P's “net overseas hours”.

Step 3 Subtract from 365 (or 366 if year X includes 29 February)—the total number of disregarded days, andany days that are allowed to be subtracted, in accordance with the rules in paragraph 28 of this Schedule, to take account of periods of leave and gaps between employments.The result is referred to as the “reference period”.

Step 4 Divide the reference period by 7. If the answer is more than 1 and is not a whole number, round down to the nearest whole number. If the answer is less than 1, round up to 1.

Step 5 Divide P's net overseas hours by the number resulting from step 4.If the answer is 35 or more, P is considered to work “sufficient hours overseas” as assessed over year X.

(4) This paragraph does not apply to P if—

(a) P has a relevant job on board a vehicle, aircraft or ship at any time in year X, and

(b) at least 6 of the trips that P makes in year X as part of that job are cross-border trips that either begin in the UK, end in the UK or begin and end in the UK.

15

(1) The fourth automatic overseas test is that—

(a) P dies in year X,

(b) P was resident in the UK for neither of the 2 tax years preceding year X or, alternatively, P's case falls within sub-paragraph (2), and

(2) P's case falls within this sub-paragraph if—

(a) P was not resident in the UK for the tax year preceding year X, and

(b) the tax year before that was a split year as respects P because the circumstances of the case fell within Case 1, Case 2 or Case 3 (see Part 3 of this Schedule).

16

(1) The fifth automatic overseas test is that—

(a) P dies in year X,

(b) P was resident in the UK for neither of the 2 tax years preceding year X because P met the third automatic overseas test for each of those years or, alternatively, P's case falls within sub-paragraph (2), and

(2) P's case falls within this sub-paragraph if—

(a) P was not resident in the UK for the tax year preceding year X because P met the third automatic overseas test for that year, and

(b) the tax year before that was a split year as respects P because the circumstances of the case fell within Case 1 (see Part 3 of this Schedule).

(3) The relevant modifications of paragraph 14 are—

(a) in sub-paragraph (1)(a) and (b) and sub-paragraph (3), for “year X” read “the period from the start of year X up to and including the day before the day of P's death”, and

(b) in step 3 of sub-paragraph (3), for “365 (or 366 if year X includes 29 February)” read “the number of days in the period from the start of year X up to and including the day before the day of P's death”.

The sufficient ties test

17

(1) The sufficient ties test is met for year X if—

(a) P meets none of the automatic UK tests and none of the automatic overseas tests, but

(b) P has sufficient UK ties for that year.

(2) “UK ties” is defined in Part 2 of this Schedule.

(3) Whether P has “sufficient” UK ties for year X will depend on—

(a) whether P was resident in the UK for any of the previous 3 tax years, and

(b) the number of days that P spends in the UK in year X.

(4) The Tables in paragraphs 18 and 19 show how many ties are sufficient in each case.

Sufficient UK ties

18

The Table below shows how many UK ties are sufficient in a case where P was resident in the UK for one or more of the 3 tax years preceding year X—

19

The Table below shows how many UK ties are sufficient in a case where P was resident in the UK for none of the 3 tax years preceding year X—

20

(1) If P dies in year X, paragraph 18 has effect as if the words “More than 15 but” were omitted from the first column of the Table.

(2) In addition to that modification, if the death occurs before 1 March in year X, paragraphs 18 and 19 have effect as if each number of days mentioned in the first column of the Table were reduced by the appropriate number.

(3) The appropriate number is found by multiplying the number of days, in each case, by—

$$A 12$where “A” is the number of whole months in year X after the month in which P dies.$

(4) If, for any number of days, the appropriate number is not a whole number, the appropriate number is to be rounded up or down as follows—

(a) if the first figure after the decimal point is 5 or more, round the appropriate number up to the nearest whole number,

(b) otherwise, round it down to the nearest whole number.

PART 2 — Key concepts

Introduction

21

This Part of this Schedule defines some key concepts for the purposes of this Schedule.

Days spent

22

(1) If P is present in the UK at the end of a day, that day counts as a day spent by P in the UK.

(2) But it does not do so in the following two cases.

(3) The first case is where—

(a) P only arrives in the UK as a passenger on that day,

(b) P leaves the UK the next day, and

(c) between arrival and departure, P does not engage in activities that are to a substantial extent unrelated to P's passage through the UK.

(4) The second case is where—

(a) P would not be present in the UK at the end of that day but for exceptional circumstances beyond P's control that prevent P from leaving the UK, and

(b) P intends to leave the UK as soon as those circumstances permit.

(5) Examples of circumstances that may be “exceptional” are—

(a) national or local emergencies such as war, civil unrest or natural disasters, and

(b) a sudden or life-threatening illness or injury.

(6) For a tax year—

(a) the maximum number of days to which sub-paragraph (2) may apply in reliance on sub-paragraph (4) is limited to 60, and

(b) accordingly, once the number of days within sub-paragraph (4) reaches 60 (counting forward from the start of the tax year), any subsequent days within that sub-paragraph, whether involving the same or different exceptional circumstances, will count as days spent by P in the UK.

23

(1) If P is not present in the UK at the end of a day, that day does not count as a day spent by P in the UK.

(2) This is subject to the deeming rule.

(3) The deeming rule applies if—

(a) P has at least 3 UK ties for a tax year,

(b) the number of days in that tax year when P is present in the UK at some point in the day but not at the end of the day (“qualifying days”) is more than 30, and

(4) The deeming rule is that, once the number of qualifying days in the tax year reaches 30 (counting forward from the start of the tax year), each subsequent qualifying day in the tax year is to be treated as a day spent by P in the UK.

(5) The deeming rule does not apply for the purposes of sub-paragraph (3)(a) (so, in deciding for those purposes whether P has a 90-day tie, qualifying days in excess of 30 are not to be treated as days spent by P in the UK).

Days spent “in” a period

24

Any reference to a number of days spent in the UK “in” a given period is a reference to the total number of days spent there (in aggregate) in that period, whether continuously or intermittently.

Home

25

(1) A person's home could be a building or part of a building or, for example, a vehicle, vessel or structure of any kind.

(2) Whether, for a given building, vehicle, vessel, structure or the like, there is a sufficient degree of permanence or stability about P's arrangements there for the place to count as P's home (or one of P's homes) will depend on all the circumstances of the case.

(3) But somewhere that P uses periodically as nothing more than a holiday home or temporary retreat (or something similar) does not count as a home of P's.

(4) A place may count as a home of P's whether or not P holds any estate or interest in it (and references to “having” a home are to be read accordingly).

(5) Somewhere that was P's home does not continue to count as such merely because P continues to hold an estate or interest in it after P has moved out (for example, if P is in the process of selling it or has let or sub-let it, having set up home elsewhere).

Work

26

(1) P is considered to be “working” (or doing “work”) at any time when P is doing something—

(a) in the performance of duties of an employment held by P, or

(b) in the course of a trade carried on by P (alone or in partnership).

(2) In deciding whether something is being done in the performance of duties of an employment, regard must be had to whether, if value were received by P for doing the thing, it would fall within the definition of employment income in section 7 of ITEPA 2003.

(3) In deciding whether something is being done in the course of a trade, regard must be had to whether, if expenses were incurred by P in doing the thing, the expenses could be deducted in calculating the profits of the trade for income tax purposes.

(4) Time spent travelling counts as time spent working—

(a) if the cost of the journey could, if it were incurred by P, be deducted in calculating P's earnings from that employment under section 337, 338, 340 or 342 of ITEPA 2003 or, as the case may be, in calculating the profits of the trade under ITTOIA 2005, or

(b) to the extent that P does something else during the journey that would itself count as work in accordance with this paragraph.

(5) Time spent undertaking training counts as time spent working if—

(a) in the case of an employment held by P, the training is provided or paid for by the employer and is undertaken to help P in performing duties of the employment, and

(b) in the case of a trade carried on by P, the cost of the training could be deducted in calculating the profits of the trade for income tax purposes.

(6) Sub-paragraphs (4) and (5) have effect without prejudice to the generality of sub-paragraphs (2) and (3).

(7) Assume for the purposes of sub-paragraphs (2) to (5) that P is someone who is chargeable to income tax under ITEPA 2003 or ITTOIA 2005.

(8) A voluntary post for which P has no contract of service does not count as an employment for the purposes of this Schedule.

Location of work

27

(1) Work is done where it is actually done, regardless of where the employment is held or the trade is carried on by P.

(2) But work done by way of or in the course of travelling to or from the UK by air or sea or via a tunnel under the sea is assumed to be done overseas even during the part of the journey in or over the UK.

(3) For these purposes, travelling to or from the UK is taken to—

(a) begin when P boards the aircraft, ship or train that is bound for a destination in the UK or (as the case may be) overseas, and

(b) end when P disembarks from that aircraft, ship or train.

(4) This paragraph is subject to express provisions in this Schedule about the location of work done by people with relevant jobs on board vehicles, aircraft or ships.

Rules for calculating the reference period

28

(1) This paragraph applies in calculating the “reference period” (which is a step taken in determining whether P works “sufficient hours in the UK” or “sufficient hours overseas” as assessed over a given period of days).

(2) The number of days in the given period may be reduced to take account of—

(a) reasonable amounts of annual leave or parenting leave taken by P during the period (for all employments held and trades carried on by P during the period, whether in the UK or overseas),

(b) absences from work at times during the period when P is on sick leave and cannot reasonably be expected to work as a result of the illness or injury in question, and

(3) But no reduction may be made in respect of any day that is a “disregarded day” (see paragraphs 9(2) and 14(3) in Part 1 of this Schedule).

(4) For any particular employment or trade, “reasonable” amounts of annual leave or parenting leave are to be assessed having regard to (among other things)—

(a) the nature of the work, and

(b) the country or countries where P is working.

(5) Non-working days are “embedded within” a block of leave only if there are, as part of that block of leave—

(a) at least 3 consecutive days of leave taken before the non-working day or series of non-working days in question, and

(b) at least 3 consecutive days of leave taken after the non-working day or series of non-working days in question.

(6) A “non-working day” is any day of the week, month or year on which P—

(a) is not normally expected to work (according to P's contract of employment or usual pattern of work), and

(b) does not in fact work.

(7) In calculating the reductions to be made under sub-paragraph (2)—

(a) if it turns out, after applying sub-paragraph (3), that the reasonable amounts of annual leave or parenting leave or, as the case may be, the absences from work on sick leave do not add up (across the period) to a whole number of days, the number in that case is to be rounded down to the nearest whole number, but

(b) any such rounding is to be ignored for the purposes of sub-paragraph (2)(c).

(8) If—

(a) P changes employment during the given period,

(b) there is a gap between the two employments, and

the number of days in the given period may be reduced by the number of days in that gap.

(9) But—

(a) if the gap lasts for more than 15 days, only 15 days may be subtracted, and

(b) if there is more than one change of employment during the period, the maximum number of days that may be subtracted under sub-paragraph (8) for all the gaps in total is 30.

Significant breaks from UK or overseas work

29

(1) There is a “significant break from UK work” if at least 31 days go by and not one of those days is—

(a) a day on which P does more than 3 hours' work in the UK, or

(b) a day on which P would have done more than 3 hours' work in the UK but for being on annual leave, sick leave or parenting leave.

(2) There is a “significant break from overseas work” if at least 31 days go by and not one of those days is—

(a) a day on which P does more than 3 hours' work overseas, or

(b) a day on which P would have done more than 3 hours' work overseas but for being on annual leave, sick leave or parenting leave.

Relevant jobs on board vehicles, aircraft or ships

30

(1) P has a “relevant” job on board a vehicle, aircraft or ship if condition A and condition B are met.

(2) Condition A is that P either—

(a) holds an employment, the duties of which consist of duties to be performed on board a vehicle, aircraft or ship while it is travelling, or

(b) carries on a trade, the activities of which consist of work to be done or services to be provided on board a vehicle, aircraft or ship while it is travelling.

(3) Condition B is that substantially all of the trips made in performing those duties or carrying on those activities are ones that involve crossing an international boundary at sea, in the air or on land (referred to as “cross-border trips”).

(4) Sub-paragraph (2)(b) is not satisfied unless, in order to do the work or provide the services, P has to be present (in person) on board the vehicle, aircraft or ship while it is travelling.

(5) Duties or activities of a purely incidental nature are to be ignored in deciding whether the duties of an employment or the activities of a trade consist of duties or activities of a kind described in sub-paragraph (2)(a) or (b).

UK ties

31

(1) What counts as a “UK tie” depends on whether P was resident in the UK for one or more of the 3 tax years preceding year X.

(2) If P was resident in the UK for one or more of those 3 tax years, each of the following types of tie counts as a UK tie—

(a) a family tie,

(b) an accommodation tie,

(d) a 90-day tie, and

(e) a country tie.

(3) Otherwise, each of the following types of tie counts as a UK tie—

(a) a family tie,

(b) an accommodation tie,

(d) a 90-day tie.

(4) In order to have the requisite number of UK ties for year X, each tie of P's must be of a different type.

Family tie

32

(1) P has a family tie for year X if—

(a) in year X, a relevant relationship exists at any time between P and another person, and

(b) that other person is someone who is resident in the UK for year X.

(2) A relevant relationship exists at any time between P and another person if at the time—

(a) P and the other person are husband and wife or civil partners and, in either case, are not separated,

(b) P and the other person are living together as if they were a married couple or civil partners, or

(3) P does not have a family tie for year X by virtue of sub-paragraph (2)(c) if P sees the child in the UK on fewer than 61 days (in total) in—

(a) year X, or

(b) if the child turns 18 during year X, the part of year X before the day on which the child turns 18.

(4) A day counts as a day on which P sees the child if P sees the child in person for all or part of the day.

(5) “Separated” means separated—

(a) under an order of a court of competent jurisdiction,

(b) by deed of separation, or

33

(1) This paragraph applies in deciding for the purposes (only) of paragraph 32(1)(b) whether a person with whom P has a relevant relationship (a “family member”) is someone who is resident in the UK for year X.

(2) A family tie based on the fact that a family member has, by the same token, a relevant relationship with P is to be disregarded in deciding whether that family member is someone who is resident in the UK for year X.

(3) A family member falling within sub-paragraph (4) is to be treated as being not resident in the UK for year X if the number of days that he or she spends in the UK in the part of year X outside term-time is less than 21.

(4) A family member falls within this sub-paragraph if he or she—

(a) is a child of P's who is under the age of 18,

(b) is in full-time education in the UK at any time in year X, and

(c) is resident in the UK for year X but would not be so resident if the time spent in full-time education in the UK in that year were disregarded.

(5) In sub-paragraph (4)—

(a) references to full-time education in the UK are to full-time education at a university, college, school or other educational establishment in the UK, and

(b) the reference to the time spent in full-time education in the UK is to the time spent there during term-time.

(6) For the purposes of this paragraph, half-term breaks and other breaks when teaching is not provided during a term are considered to form part of “term-time”.

Accommodation tie

34

(1) P has an accommodation tie for year X if—

(a) P has a place to live in the UK,

(b) that place is available to P during year X for a continuous period of at least 91 days, and

(2) If there is a gap of fewer than 16 days between periods in year X when a particular place is available to P, that place is to be treated as continuing to be available to P during the gap.

(3) P is considered to have a “place to live” in the UK if—

(a) P's home or at least one of P's homes (if P has more than one) is in the UK, or

(b) P has a holiday home or temporary retreat (or something similar) in the UK, or

(4) Accommodation may be “available” to P even if P holds no estate or interest in it and even if P has no legal right to occupy it.

(5) If the accommodation is the home of a close relative of P's, sub-paragraph (1)(c) has effect as if for “at least one night” there were substituted “ a total of at least 16 nights ”.

(6) A “close relative” is—

(a) a parent or grandparent,

(b) a brother or sister,

(d) a grandchild aged 18 or over,

in each case, including by half-blood or by marriage or civil partnership.

Work tie

35

(1) P has a work tie for year X if P works in the UK for at least 40 days (whether continuously or intermittently) in year X.

(2) For these purposes, P works in the UK for a day if P does more than 3 hours' work in the UK on that day.

36

(1) This paragraph applies for the purposes of paragraph 35.

(2) It applies in cases where P has a relevant job on board a vehicle, aircraft or ship.

(3) When making a cross-border trip as part of that job—

(a) if the trip begins in the UK, P is assumed to do more than 3 hours' work in the UK on the day on which it begins,

(b) if the trip ends in the UK, P is assumed to do fewer than 3 hours' work in the UK on the day on which it ends.

(4) Those assumptions apply regardless of how late in the day the trip begins or ends (even if it begins or ends just before midnight).

(5) For the purposes of sub-paragraph (3)(a), it does not matter whether the trip ends on that same day.

(6) A day that falls within both paragraph (a) and paragraph (b) of sub-paragraph (3) is to be treated as if it fell only within paragraph (a).

(7) In the case of a cross-border trip to or from the UK that is undertaken in stages—

(a) the day on which the trip begins or, as the case may be, ends is the day on which the stage of the trip that involves crossing the UK border begins or ends, and

(b) accordingly, any day on which a stage is undertaken by P solely within the UK must (if it lasts for more than 3 hours) be counted separately as a day on which P does more than 3 hours' work in the UK.

90-day tie

37

P has a 90-day tie for year X if P has spent more than 90 days in the UK in—

(a) the tax year preceding year X,

(b) the tax year preceding that tax year, or

Country tie

38

(1) P has a country tie for year X if the country in which P meets the midnight test for the greatest number of days in year X is the UK.

(2) If—

(a) P meets the midnight test for the same number of days in year X in two or more countries, and

(b) that number is the greatest number of days for which P meets the midnight test in any country in year X,

P has a country tie for year X if one of those countries is the UK.

(3) P meets the “midnight test” in a country for a day if P is present in that country at the end of that day.

PART 3 — Split year treatment

Introduction

39

This Part of this Schedule—

(a) explains when, as respects an individual, a tax year is a split year,

(b) defines the overseas part and the UK part of a split year, and

40

(1) The effect of a tax year being a split year is to relax the effect of paragraph 2(3) (which treats individuals who are UK resident “for” a tax year as being UK resident at all times in that year).

(2) When and how the effect of paragraph 2(3) is relaxed is defined in the special charging rules introduced by the amendments made by this Part.

(3) Subject to those special charging rules (and any other special charging rules for split years that may be introduced in the future), nothing in this Part alters an individual's residence status for a tax year or affects his or her liability to tax.

41

This Part—

(a) does not apply in determining the residence status of personal representatives, and

(b) applies to only a limited extent in determining the residence status of the trustees of a settlement (see section 475 of ITA 2007 and section 69 of TCGA 1992, as amended by this Part).

42

The existence of special charging rules for cases involving split years is not intended to affect any question as to whether an individual would fall to be regarded under double taxation arrangements as a resident of the UK.

Definition of a “split year”

43

(1) As respects an individual, a tax year is a “split year” if—

(a) the individual is resident in the UK for that year, and

(b) the circumstances of the case fall within—

(i) Case 1, Case 2 or Case 3 (cases involving actual or deemed departure from the UK), or

(ii) Case 4, Case 5, Case 6, Case 7 or Case 8 (cases involving actual or deemed arrival in the UK).

(2) The 8 Cases are described in paragraphs 44 to 51.

(3) In those paragraphs, the individual is referred to as “the taxpayer” and the tax year as “the relevant year”.

(4) In applying Part 2 of this Schedule to those paragraphs, for “P” read “the taxpayer”.

Case 1: starting full-time work overseas

44

(1) The circumstances of a case fall within Case 1 if they are as described in sub-paragraphs (2) to (4).

(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).

(3) There is at least one period (consisting of one or more days) that—

(a) begins with a day that—

(i) falls within the relevant year, and

(ii) is a day on which the taxpayer does more than 3 hours' work overseas,

(b) ends with the last day of the relevant year, and

(4) The taxpayer is not resident in the UK for the next tax year because the taxpayer meets the third automatic overseas test for that year (see paragraph 14).

(5) A period “satisfies the overseas work criteria” if—

(a) the taxpayer works sufficient hours overseas, as assessed over that period,

(b) during that period, there are no significant breaks from overseas work,

(c) the number of days in that period on which the taxpayer does more than 3 hours' work in the UK does not exceed the permitted limit, and

(d) the number of days in that period falling within sub-paragraph (6) does not exceed the permitted limit.

(6) A day falls within this sub-paragraph if—

(a) it is a day spent by the taxpayer in the UK, but

(b) it is not a day that is treated under paragraph 23(4) as a day spent by the taxpayer in the UK.

(7) To work out whether the taxpayer works “sufficient hours overseas” as assessed over a given period, apply paragraph 14(3) but with the following modifications—

(a) for “P” read “the taxpayer”,

(b) for “year X” read “the period under consideration”,

(d) in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30” read “the permitted limit”.

(8) The permitted limit is—

(a) for sub-paragraphs (5)(c) and (7)(d), the number found by reducing 30 by the appropriate number, and

(b) for sub-paragraph (5)(d), the number found by reducing 90 by the appropriate number.

(9) The appropriate number is the result of—

$$A × B 12$where—“A” is—30, for sub-paragraphs (5)(c) and (7)(d), or90, for sub-paragraph (5)(d), and“B” is the number of whole months in the part of the relevant year before the day mentioned in sub-paragraph (3)(a).$

Case 2: the partner of someone starting full-time work overseas

45

(1) The circumstances of a case fall within Case 2 if they are as described in sub-paragraphs (2) to (6).

(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).

(3) The taxpayer has a partner whose circumstances fall within Case 1 for—

(a) the relevant year, or

(b) the previous tax year.

(4) On a day in the relevant year, the taxpayer moves overseas so the taxpayer and the partner can continue to live together while the partner is working overseas.

(5) In the part of the relevant year beginning with the deemed departure day—

(a) the taxpayer has no home in the UK at any time, or has homes in both the UK and overseas but spends the greater part of the time living in the overseas home, and

(b) the number of days that the taxpayer spends in the UK does not exceed the permitted limit.

(6) The taxpayer is not resident in the UK for the next tax year.

(7) If sub-paragraph (3)(a) applies, the “deemed departure day” is the later of—

(a) the day mentioned in sub-paragraph (4), and

(b) the first day of what is, for the partner, the overseas part of the relevant year as defined for Case 1 (see paragraph 53).

(8) If sub-paragraph (3)(b) applies, the “deemed departure day” is the day mentioned in sub-paragraph (4).

(9) The permitted limit is the number found by reducing 90 by the appropriate number.

(10) The appropriate number is the result of—

$$A × B 12$where—“A” is 90, and“B” is the number of whole months in the part of the relevant year before the deemed departure day.$

Case 3: ceasing to have a home in the UK

46

(1) The circumstances of a case fall within Case 3 if they are as described in sub-paragraphs (2) to (6).

(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).

(3) At the start of the relevant year the taxpayer had one or more homes in the UK but—

(a) there comes a day in the relevant year when P ceases to have any home in the UK, and

(b) from then on, P has no home in the UK for the rest of that year.

(4) In the part of the relevant year beginning with the day mentioned in sub-paragraph (3)(a), the taxpayer spends fewer than 16 days in the UK.

(5) The taxpayer is not resident in the UK for the next tax year.

(6) At the end of the period of 6 months beginning with the day mentioned in sub-paragraph (3)(a), the taxpayer has a sufficient link with a country overseas.

(7) The taxpayer has a “sufficient link” with a country overseas if and only if—

(a) the taxpayer is considered for tax purposes to be a resident of that country in accordance with its domestic laws, or

(b) the taxpayer has been present in that country (in person) at the end of each day of the 6-month period mentioned in sub-paragraph (6), or

(c) the taxpayer's only home is in that country or, if the taxpayer has more than one home, they are all in that country.

Case 4: starting to have a home in the UK only

47

(1) The circumstances of a case fall within Case 4 if they are as described in sub-paragraphs (2) to (4).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) At the start of the relevant year, the taxpayer did not meet the only home test, but there comes a day in the relevant year when that ceases to be the case and the taxpayer then continues to meet the only home test for the rest of that year.

(4) For the part of the relevant year before that day, the taxpayer does not have sufficient UK ties.

(5) The “only home test” is met if—

(a) the taxpayer has only one home and that home is in the UK, or

(b) the taxpayer has more than one home and all of them are in the UK.

(6) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (4) with the following adjustments—

(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (4), and

(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.

(7) The appropriate number is found by multiplying the number of days, in each case, by—

$$A 12$where “A” is the number of whole months in the part of the relevant year beginning with the day mentioned in sub-paragraph (3).$

(8) Sub-paragraph (6)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.

Case 5: starting full-time work in the UK

48

(1) The circumstances of a case fall within Case 5 if they are as described in sub-paragraphs (2) and (3).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) There is at least one period of 365 days in respect of which the following conditions are met—

(a) the period begins with a day that—

(i) falls within the relevant year, and

(ii) is a day on which the taxpayer does more than 3 hours' work in the UK,

(b) in the part of the relevant year before the period begins, the taxpayer does not have sufficient UK ties,

(d) during the period, there are no significant breaks from UK work, and

(e) at least 75% of the total number of days in the period on which the taxpayer does more than 3 hours' work are days on which the taxpayer does more than 3 hours' work in the UK.

(4) To work out whether the taxpayer works “sufficient hours in the UK” as assessed over a given period, apply paragraph 9(2) but for “P” read “the taxpayer”.

(5) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (3)(b) with the following adjustments—

(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (3)(b), and

(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.

(6) The appropriate number is found by multiplying the number of days, in each case, by—

$$A 12$where “A” is the number of whole months in the part of the relevant year beginning with the day on which the 365-day period in question begins.$

(7) Sub-paragraph (5)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.

Case 6: ceasing full-time work overseas

49

(1) The circumstances of a case fall within Case 6 if they are as described in sub-paragraphs (2) to (4).

(2) The taxpayer—

(a) was not resident in the UK for the previous tax year because the taxpayer met the third automatic overseas test for that year (see paragraph 14), but

(b) was resident in the UK for one or more of the 4 tax years immediately preceding that year.

(3) There is at least one period (consisting of one or more days) that—

(a) begins with the first day of the relevant year,

(b) ends with a day that—

(i) falls within the relevant year, and

(ii) is a day on which the taxpayer does more than 3 hours' work overseas, and

(4) The taxpayer is resident in the UK for the next tax year (whether or not it is a split year).

(5) A period “satisfies the overseas work criteria” if—

(a) the taxpayer works sufficient hours overseas, as assessed over that period,

(b) during that period, there are no significant breaks from overseas work,

(c) the number of days in that period on which the taxpayer does more than 3 hours' work in the UK does not exceed the permitted limit, and

(d) the number of days in that period falling within sub-paragraph (6) does not exceed the permitted limit.

(6) A day falls within this sub-paragraph if—

(a) it is a day spent by the taxpayer in the UK, but

(b) it is not a day that is treated under paragraph 23(4) as a day spent by the taxpayer in the UK.

(7) To work out whether the taxpayer works “sufficient hours overseas” as assessed over a given period, apply paragraph 14(3) but with the following modifications—

(a) for “P” read “the taxpayer”,

(b) for “year X” read “the period under consideration”,

(d) in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30” read “the permitted limit”.

(8) The permitted limit is—

(a) for sub-paragraphs (5)(c) and (7)(d), the number found by reducing 30 by the appropriate number, and

(b) for sub-paragraph (5)(d), the number found by reducing 90 by the appropriate number.

(9) The appropriate number is the result of—

$$A × B 12$where—“A” is—30, for sub-paragraphs (5)(c) and (7)(d), or90, for sub-paragraph (5)(d), and“B” is the number of whole months in the part of the relevant year after the 365-day period in question ends.$

Case 7: the partner of someone ceasing full-time work overseas

50

(1) The circumstances of a case fall within Case 7 if they are as described in sub-paragraphs (2) to (6).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) The taxpayer has a partner whose circumstances fall within Case 6 for—

(a) the relevant year, or

(b) the previous tax year.

(4) On a day in the relevant year, the taxpayer moves to the UK so the taxpayer and the partner can continue to live together on the partner's return or relocation to the UK.

(5) In the part of the relevant year before the deemed arrival day—

(a) the taxpayer has no home in the UK at any time, or has homes in both the UK and overseas but spends the greater part of the time living in the overseas home, and

(b) the number of days that the taxpayer spends in the UK does not exceed the permitted limit.

(6) The taxpayer is resident in the UK for the next tax year (whether or not it is a split year).

(7) If sub-paragraph (3)(a) applies, the “deemed arrival day” is the later of—

(a) the day mentioned in sub-paragraph (4), and

(b) the first day of what is, for the partner, the UK part of the relevant year as defined for Case 6 (see paragraph 54).

(8) If sub-paragraph (3)(b) applies, the “deemed arrival day” is the day mentioned in sub-paragraph (4).

(9) The permitted limit is the number found by reducing 90 by the appropriate number.

(10) The appropriate number is the result of—

$$A × B 12$where—“A” is 90, and“B” is the number of whole months in the part of the relevant year beginning with the deemed arrival day.$

Case 8: starting to have a home in the UK

51

(1) The circumstances of a case fall within Case 8 if they are as described in sub-paragraphs (2) to (5).

(2) The taxpayer was not resident in the UK for the previous tax year.

(3) At the start of the relevant year, the taxpayer had no home in the UK but—

(a) there comes a day when, for the first time in that year, the taxpayer does have a home in the UK, and

(b) from then on, the taxpayer continues to have a home in the UK for the rest of that year and for the whole of the next tax year.

(4) For the part of the relevant year before the day mentioned in sub-paragraph (3)(a), the taxpayer does not have sufficient UK ties.

(5) The taxpayer is resident in the UK for the next tax year and that tax year is not a split year as respects the taxpayer.

(6) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (4) with the following adjustments—

(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (4), and

(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.

(7) The appropriate number is found by multiplying the number of days, in each case, by—

$$A 12$where “A” is the number of whole months in the part of the relevant year beginning with the day mentioned in sub-paragraph (3)(a).$

(8) Sub-paragraph (6)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.

General rules for construing Cases 1 to 8

52

(1) This paragraph applies for the purposes of paragraphs 44 to 51.

(2) A reference to “the previous tax year” is to the tax year preceding the relevant year.

(3) A reference to “the next tax year” is to the tax year following the relevant year.

(4) “Partner”, in relation to the taxpayer, means—

(a) a husband or wife or civil partner, or

(b) if the taxpayer and another person are living together as if they were a married couple or civil partners, that other person, ...

(5) If calculation of the appropriate number results in a number of days that is not a whole number, the appropriate number is to be rounded up or down as follows—

(a) if the first figure after the decimal point is 5 or more, round the appropriate number up to the nearest whole number,

(b) otherwise, round it down to the nearest whole number.

The overseas part

53

(1) “The overseas part” of a split year is the part of that year defined below—

(a) for the Case in question, or

(b) if the taxpayer's circumstances fall within more than one Case, for the Case which has priority (see paragraphs 54 and 55).

(2) For Case 1, the overseas part is—

(a) if there is only one period falling within paragraph 44(3), the part beginning with the first day of that period, and

(b) if there is more than one such period, the part beginning with the first day of the longest of those periods.

(3) For Case 2, the overseas part is the part beginning with the deemed departure day as defined in paragraph 45(7) and (8).

(4) For Case 3, the overseas part is the part beginning with the day mentioned in paragraph 46(3)(a).

(5) For Case 4, the overseas part is the part before the day mentioned in paragraph 47(3).

(6) For Case 5, the overseas part is—

(a) if there is only one period falling within paragraph 48(3), the part before that period begins, and

(b) if there is more than one such period, the part before the first of those periods begins.

(7) For Case 6, the overseas part is—

(a) if there is only one period falling within paragraph 49(3), the part ending with the last day of that period, and

(b) if there is more than one such period, the part ending with the last day of the longest of those periods.

(8) For Case 7, the overseas part is the part before the deemed arrival day as defined in paragraph 50(7) and (8).

(9) For Case 8, the overseas part is the part before the day mentioned in paragraph 51(3)(a).

Priority between Cases 1 to 3

54

(1) This paragraph applies to determine which Case has priority where the taxpayer's circumstances for the relevant year fall within two or all of the following—

Case 1 (starting full-time work overseas);

Case 2 (the partner of someone starting full-time work overseas);

Case 3 (ceasing to have a home in the UK).

(2) Case 1 has priority over Case 2 and Case 3.

(3) Case 2 has priority over Case 3.

Priority between Cases 4 to 8

55

(1) This paragraph applies to determine which Case has priority where the taxpayer's circumstances for the relevant year fall within two or more of the following—

Case 4 (starting to have a home in the UK only);

Case 5 (starting full-time work in the UK);

Case 6 (ceasing full-time work overseas);

Case 7 (the partner of someone ceasing full-time work overseas);

Case 8 (starting to have a home in the UK).

(2) In this paragraph “the split year date” in relation to a Case means the final day of the part of the relevant year defined in paragraph 53(5) to (9) for that Case.

(3) If Case 6 applies—

(a) if Case 5 also applies and the split year date in relation to Case 5 is earlier than the split year date in relation to Case 6, Case 5 has priority;

(b) otherwise, Case 6 has priority.

(4) If Case 7 (but not Case 6) applies—

(a) if Case 5 also applies and the split year date in relation to Case 5 is earlier than the split year date in relation to Case 7, Case 5 has priority;

(b) otherwise, Case 7 has priority

(5) If two or all of Cases 4, 5 and 8 apply (but neither Case 6 nor Case 7), the Case which has priority is the one with the earliest split year date.

(6) But if, in a case to which sub-paragraph (5) applies, two or all of the Cases which apply share the same split year date and that date is the only, or earlier, split year date of the Cases which apply, the Cases with that split year date are to be treated as having priority.

The UK part

56

“The UK part” of a split year is the part of that year that is not the overseas part.

Special charging rules for employment income

57

ITEPA 2003 is amended as follows.

58

(1) In section 15 (earnings for year when employee UK resident), for subsection (1) substitute—

(1) This section applies to general earnings for a tax year for which the employee is UK resident except that, in the case of a split year, it does not apply to any part of those earnings that is excluded. (1A) General earnings are “excluded” if they— (a) are attributable to the overseas part of the split year, and (b) are neither— (i) general earnings in respect of duties performed in the United Kingdom, nor (ii) general earnings from overseas Crown employment subject to United Kingdom tax.

(2) After subsection (3) insert—

(4) Any attribution required for the purposes of subsection (1A)(a) is to be done on a just and reasonable basis. (5) The following provisions of Chapter 5 of this Part apply for the purposes of subsection (1A)(b) as for the purposes of section 27(2)— (a) section 28 (which defines “general earnings from overseas Crown employment subject to United Kingdom tax”), and (b) sections 38 to 41 (which contain rules for determining the place of performance of duties of employment). (6) Subject to any provision made in an order under section 28(5) for the purposes of subsection (1A)(b), provisions made in an order under that section for the purposes of section 27(2) apply for the purposes of subsection (1A)(b) too.

59

In section 22 (chargeable overseas earnings for year when remittance basis applies and employee outside section 26), for subsection (7) substitute—

(7) Section 15(1) does not apply to general earnings within subsection (1).

60

(1) Section 23 (calculation of “chargeable overseas earnings”) is amended as follows.

(2) In subsection (3), for step 1 substitute—

Step 1 Identify— (a) in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and (b) in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year.

(3) In that subsection, in step 2, for “those earnings” substitute “ the earnings identified under step 1 ”.

(4) After that subsection insert—

(4) Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis.

61

(1) Section 24 (limit on chargeable overseas earnings where duties of associated employment performed in UK) is amended as follows.

(2) After subsection (2) insert—

(2A) If the tax year is a split year as respects the employee, subsection (2) has effect as if for “the aggregate earnings for that year from all the employments concerned” there were substituted “ so much of the aggregate earnings for that year from all the employments concerned as is attributable to the UK part of that year ”.

(3) After subsection (3) insert—

(3A) Any attribution required for the purposes of subsection (2A) is to be done on a just and reasonable basis.

62

(1) Section 26 (foreign earnings for year when remittance basis applies and employee meets section 26A requirement) is amended as follows.

(2) In subsection (1), for the words from “if the general earnings” to the end substitute

if the general earnings meet all of the following conditions— (a) they are neither— (i) general earnings in respect of duties performed in the United Kingdom, nor (ii) general earnings from overseas Crown employment subject to United Kingdom tax, and (b) if the tax year is a split year as respects the employee, they are attributable to the UK part of the year.

(3) After subsection (5) insert—

(5A) Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis.

(4) For subsection (6) substitute—

(6) Section 15(1) does not apply to general earnings within subsection (1).

63

In section 232 (giving effect to mileage allowance relief), after subsection (6) insert—

(6A) If the earnings from which a deduction allowed under this section is deductible include earnings that are “excluded” within the meaning of section 15(1A)— (a) the amount of the deduction allowed is a proportion of the amount that would be allowed under this section if the tax year were not a split year, and (b) that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings.

64

(1) Section 329 (deduction from earnings not to exceed earnings) is amended as follows.

(2) After subsection (1) insert—

(1A) If the earnings from which a deduction allowed under this Part is deductible include earnings that are “excluded” within the meaning of section 15(1A)— (a) the amount of the deduction allowed is a proportion of the amount that would be allowed under this Part if the tax year were not a split year, and (b) that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings.

(3) In subsection (2), after “those earnings” insert “ (or, in a case within subsection (1A), the part of those earnings that is not “excluded”) ”.

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