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Tax bodies welcome progress on statutory residence test

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The CIOT has welcomed draft legislation introducing a statutory definition of residence for tax purposes. Budget 2012 announced that ‘ordinary residence’ would be abolished from 6 April 2013 but overseas workday relief would be retained and put it on a statutory footing.

John Barnett, Chairman of the CIOT’s Capital Gains Tax and Investment Income Sub-Committee, said: ‘The rules on tax residence are messy and uncertain and a long way from what we need for a modern tax system. Moving to a statutory test will give businesses and individuals greater certainty in an increasingly mobile world.’

The ICAEW Tax Faculty said some concerns had been addressed but others remained the subject of consultation.

Philip Fisher, Head of Employment Tax and Rewards at PKF said that while it was ‘pleasing to see that the Treasury has listened to some of the objections to its original plans’, the latest version was ‘unnecessarily complicated’.

HM Treasury’s summary of responses to the June 2011 consultation includes 60 pages of draft legislation for Finance Bill 2013. The Treasury said it received 117 responses to the consultation. Most respondents favoured of abolishing the concept of ordinary residence.

‘Almost all respondents welcomed the government’s aim of introducing a statutory residence test and providing clarity for the taxpayer. In general, the format and structure of the proposed test were welcomed and seen as a significant step forward,’ it said. ‘A few argued that a pure day counting test would be preferable, mainly on the grounds that it would be simpler. However, most respondents felt that the proposal set out a clear way for the individual to determine their residence status and that it would provide increased certainty in a complex area.’

The Treasury invited comments by 13 September on the draft legislation and issues raised in the response document.