Ordinary residence ― transitional rules (2013/14 to 2015/16)

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Ordinary residence ― transitional rules (2013/14 to 2015/16)
  • Introduction
  • What is ordinary residence?
  • Effect on tax provisions which used the concept of ordinary residence
  • Transitional provisions
  • Provisions which retain the concept of ordinary residence

Introduction

Until 5 April 2013, ordinary residence was one of three key factors you needed to consider when deciding whether, or to what extent, an individual was liable to tax in the UK. The others factors being residence and domicile.

Residence is established on a year by year basis, and can be broken by absences abroad. See the Residence ― overview guidance note. Ordinary residence arose as the result of a settled purpose, and so could continue despite absences. Domicile is distinguished from ordinary residence because it is more permanent and difficult to dislodge, see the Domicile guidance note.

Although ordinary residence was abolished as a concept for tax purposes from 6 April 2013, you may need to consider the individual’s ordinary residence status in the 2013/14 to 2015/16 tax years as there are transitional provisions which might impact the tax position. These transitional provisions are discussed in this guidance note.

What is ordinary residence?

Ordinary residence has never been defined in statute, so it is necessary to consider the case law. It has been defined as:

“a person’s abode in a particular country which he or she has adopted voluntarily as part of the regular order of his or her life for the time being, whether of short or long duration.”

There must also be ‘a degree of settled purpose’. This can include education, business or profession, employment, health, family, or ‘merely love of the place’.

Barnet LBC v Shah [1983] 1 All ER 226; Genovese v HMRC [2009] STC (SCD) 373 at [35] (both subscription sensitive)

In order to apply the transitional rules for the 2013/14 to 2015/16 tax years, you need to know the individual’s ordinary residence status in those years (pretending that concept had not been abolished). For guidance on determining someone’s ordinary residence status, see

More on Residence, remittance etc: