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CIOT: Statutory Residence Test is step in right direction

CIOT: Statutory Residence Test is step in right direction

The Chartered Institute of Taxation (CIOT) has given a qualified welcome to the introduction of the long-awaited Statutory Residence Test (SRT) as a positive step towards modernising the UK’s system of deciding tax residency.

The new SRT system sets out a series of rules that should enable the taxpayer to help determine whether they are resident in the UK for tax purposes. Additionally the concept of ‘ordinary residence’ is being abolished. The legislation is implemented as part of Finance Act 2013 which gained Royal Assent today.

John Barnett, Chair of the CIOT’s Capital Gains Tax & Investment Income Sub-Committee, commented:

“In 1936, the year in which Fred Perry won the Wimbledon Men’s Singles, the Income Tax Codification Committee, appointed by the Chancellor of the Exchequer, noted that the lack of a definition of what makes someone resident for tax purposes was “intolerable”. A mere 77 years later, and with another British Men’s Singles’ champion, the UK finally has a comprehensive statutory test of residence for tax purposes.

“The CIOT has consistently called for such a test to be enshrined in law and has been extensively involved in dialogue between HMRC, HMT, business and the tax profession since 2008 which has resulted in a first for the UK.

“Rough edges remain and this has been a long hard road but the legislation is a good example of where an extensive consultative process with the tax profession has made a positive difference. There is no doubt that the strength of our economy relies on having clear rules about who and who doesn’t fall into our tax net. This legislation will go some way toward relieving concern in this area.

“The legislation sweeps aside an outdated and cumbersome system which relied on centuries old case law; it is a positive step towards having an open economy.

“We do maintain some reservations. For example, some subjective tests remain and some people will need to be careful in their record keeping around working hours. No-one should imagine that conflict between HMRC and taxpayers over residence will end as a result of the SRT.

“Although we lament the fact that the legislation has grown even longer, it is in this case necessary. This is about providing certainty; there is a real need for simple guidance for those who do not have advisers, particularly in terms of what records need to be kept to ‘prove’ a position.

“We strongly welcome the abolition of the concept of ordinary residence, an important simplification which will help to allay concerns about the complexity of SRT rules.”

ENDS

Contact: James Knell on 020 7340 2702 (jknell@ciot.org.uk) / George Crozier on 020 7340 0569 or 07740 477374 (gcrozier@ciot.org.uk)

Notes for editors

1. The provisions of the SRT take effect from the start of the 2013/14 financial year, April 6th

2. The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 16,800 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

James Knell
External Relations Officer

D: +44 (0)20 7340 2702

Chartered Institute of Taxation
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