Ordinary residence

By Tolley in association with Paul Tew

The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Ordinary residence
  • Introduction to ordinary residence
  • OWR
  • OWR prior to 6 April 2013
  • Ordinary residence for OWR prior to 6 April 2013
  • Section 690 determinations
  • Foreign service relief in relation to termination payments

Introduction to ordinary residence

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 (ITA 2007, s 38)
  • income from Ulster Savings Certificates exemption (ITTOIA 2005, s 693)
  • certification of diplomatic exemption which is linked to ordinary residence outside the UK (ITA 2007, s 841)

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 also remains important for individuals who claim Overseas Workday Relief (OWR) under transitional provisions. See the Overseas workday relief 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

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