Split year: Tax residence when coming in or going out of Britain

Under the Statutory Residence Test (SRT), an individual is either UK resident or non-UK resident for a full tax year, and at all times in that tax year.

What is a split year

However, if during a year the individual starts to live or work abroad, or comes from abroad to live or work in the UK, the tax year will be split into 2 parts, if their circumstances meet specific criteria:

• a UK part for which they will be charged to UK tax as a UK resident
• an overseas part for which, for most purposes, the individual will be charged to UK tax as a non-UK resident.

Under the SRT, an individual who is resident in the UK for a year is obliged to consider whether split year treatment applies to them. They must consider each of the cases of split year and decide if, in respect of each case, they meet all the conditions.

If they meet all the conditions of one of the cases of split year it will be applied to them. The individual does not have a choice whether split year treatment applies.

If they meet all the conditions of more than 1 case of split year the priority ordering rules are applied. See RDRM12030 for more details.

The HMRC booklet RDR1 provides a broad guide to the taxation of different income sources to determine the impact split year treatment will have on the tax an individual has to pay.

When is a tax year split?

An individual must be UK resident for a tax year under the SRT to meet the criteria for split year treatment for that year. They will not meet the split year criteria for a tax year for which they are non-UK resident under the SRT.

Split year treatment in the context of the SRT applies only to the person in their individual capacity. It does not apply to individuals acting as personal representatives. It applies in a limited way to individuals acting as a trustee of a settlement in determining the trustees’ residence status:

• if the individual becomes or ceases to be a trustee of the settlement during the tax year
• provided that the period they are a trustee falls within the overseas part of the tax year for that individual

Split year treatment will not affect whether the individual is regarded as UK resident for the purposes of any double taxation agreement.

When will split year treatment apply?

There are 8 sets of circumstances when an individual might meet the criteria for split year treatment for a particular tax year. Three cover situations when an individual might go overseas part way through the tax year, these are Cases 1-3. Five cover situations where an individual might come to the UK part way through a tax year, these are Cases 4-8.

If an individual’s circumstances fall within more than 1 case of split year criteria then the cases must be considered following a priority ordering rule. This determines both the case of split year that applies as well as the date that the year will be split from.

If an individual was resident in the year prior to the tax year in question, and their circumstances for the departure year fall within 2 or more of Cases 1-3:

• Case 1 has priority over Case 2 and 3
• Case 2 has priority over Case 3

If an individual was not UK resident in the year prior to the year in question, and their circumstances for the arrival year fall within 2 or more of Cases 4-8 refer to the table below:

In relation to split year Cases 4-8, the split year date means the final day of the overseas part of the year for that case. Refer to RDRM12150 onwards for Cases 4 to 8.

Above content was taken from the following HMRC internal manuals;

RDRM12010

RDRM12020

RDRM12030