The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:
Ordinary residence was abolished for most income tax purposes from 6 April 2013 but ordinary residence remains for the purpose of:
blind person’s allowance
income from Ulster Savings Certificates exemption
certification of diplomatic exemption which is linked to ordinary residence outside the UK
More significantly, the concept of ordinary residence remains for the purpose of determining liability to National Insurance contributions (see the Residence and ordinary residence for social security purposes guidance note).
Ordinary residence was not defined for tax purposes prior to 6 April 2013 but was a common law concept. Ordinary residence will, therefore, continue as the same common law concept for non-tax purposes.
It is outside the scope of this guidance note to run through all the changes to the legislation resulting from the abolition of ordinary residence but prior to 5 April 2013, resident and ordinarily resident individuals could not claim OWR. Additionally, to be liable to capital gains taxation, individuals had to be resident or ordinarily resident. From 6 April 2013, they only need to be resident. Broadly speaking the effect of the amendments can be described as:
where a provision relied on an individual being resident or ordinarily resident, from 6 April 2013 it applies when resident
where a taxing provision relied on individual being resident and ordinarily resident, from 6 April 2013 it is in general only necessary to be resident
where a deduction or exemption was dependent on an individual being resident but not ordinarily resident, from 6 April 2013 it depends on being non-resident
This summary is clearly a simplification and the actual provisions should be consulted.
Strictly, OWR is not a relief and is not claimed. It is merely shorthand for saying that some of the earnings for overseas duties have not been subject to UK taxation because they are taxable on the remittance basis and have not been remitted. For details on this and the rules that apply from 6 April 2013 in respect
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