An individual who is not residing in UK is subject to income tax in UK or corporation tax in case of a company only on income arising within UK from a source. Likewise, a UK company is subject to corporation tax on capital gains if the gain is accrued from the sale of assets anywhere in the globe and an individual is liable pay capital gain tax on the capital gains earned. An individual is not subject to UK’s capital gains tax if he is not resident in the UK, unless the gain is generated on the sale of the assets of a UK resident’s permanent establishment.
As per s 831 of the Income Tax A ct 2007, if a person who has stayed in UK for 183 or more number of days in a tax year will be recognised as a resident for that tax year. As per s 66 (1) of the Finance Act 1998, every corporation registered in UK will be viewed as a resident company in UK. If anyone does not fall in any of the above mentioned categories, then test derives from a chain of decided cases on the subject.
HMRC also regards any person as a resident if he has stayed in the UK for more than ninety days on average per annum in four successive years. In decided cases as in IRC v Brown1, however, such simple arithmetical calculation is not followed. (Elizabeth, Martin & Law 2009:475).
In UK, liability for income tax arises from the basis of residence. If one resides in UK for a particular period during a tax year, then he is liable to pay income tax for that tax year. There are set of guidelines and there are less cumbersome procedures to be observed for determining residential status.
If anyone does not fall in any of the above mentioned residential categories, then test derives from a chain of decided cases on the subject. Since, in case of any dispute as regards to residential status under UK’s Income Tax Act, then one has to approach the court for redressal of his grievances.
Employees who are on overseas duty is still ought to pay PAYE if they receive payments from UK employer. A UK