Application of split year treatment to component income and gains (2013/14 onwards)

By Tolley
Personal_tax_img4

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

  • Application of split year treatment to component income and gains (2013/14 onwards)
  • Overview of the split year test
  • Application of split year treatment to component income and gains
  • Employment income
  • Pension income
  • Trading income
  • Partnership income
  • Property income
  • Savings and investment income
  • Relevant foreign income
  • Capital gains
  • Temporary non-residence

A person’s liability to UK tax is determined by his residence and domicile status. From 6 April 2013, a person’s residence is determined using the statutory residence test. See the Determining residence status (2013/14 onwards) guidance note. For details of domicile and why it is important for UK tax purposes, see the Domicile guidance note.

Although residence is usually determined for the tax year as a whole, it may be possible to split the year into periods of UK residence and non-residence if the person comes to the UK or leaves the UK and meets certain conditions.

Overview of the split year test

Since 6 April 2013 split year treatment for residence status has been codified. Previously the treatment was available by the application of extra-statutory concessions and these concessions have been replicated as closely as possible in the legislation.

It is possible to split the tax year into periods of residence and non-residence if the individual is resident in the UK in that tax year (using the statutory residence test) and his circumstances fall within one of eight ‘Cases’:

  • Case 1 – loses UK residence by virtue of working abroad
  • Case 2 – the partner joins the individual overseas where the individual satisfies Case 1
  • Case 3 – leaves the UK and no longer has a home in the UK
  • Case 4 – starts to have a home in the UK and has no home overseas
  • Case 5 – starts to work in the UK
  • Case 6 – comes to the UK after ceasing work abroad
  • Case 7 – accompanies a partner who satisfies Case 6
  • Case 8 – starts to have a home in the UK, which continues throughout the following tax

More on Leaving the UK: