The tax residency certificate is nothing more than a simple document certifying that you are a tax resident of UK.
It should not be confused in any case with the residence certificate as a permanent home identifier. With the permanent residency, deals solely the Home Office and it is prudent to seek for advice on this issue from professionals in this field, such as lawyers who specialize in the Immigration Act.
PHYSICAL ENTITY (PERSON)
A Double Tax Agreement (if any), usually states that a person who declared as a tax resident in the United Kingdom and paying his/her taxes, is entitled to tax exemption for the same income in his/her country of origin. But to be declared a person, as a tax resident, this person must apply to HMRC mentioning the reasons, based on which he/she considers himself a tax resident. Then, if this person meets all the criteria, HMRC issues and sends to that person a certificate of tax residency.
You will be resident in the UK for a tax year if you do not meet any of the automatic overseas tests and you meet 1 of the automatic UK tests (criteria), or the sufficient ties test.
The main criterion that most people examine to consider themselves whether they are tax resident in UK or not, is the well known '183 days'. However, it is not the only criterion. Summarizing, in order to be considered some persona a tax resident in the UK, a person must meet at least one of the following:
➤ Living in the UK for more than 183 days - as a general main rule. ➤ All homes (or the only one) are in the UK - and at least 30 days presented at home. ➤ Works sufficient hours in the UK - full time (>3 hours) and more than 75% of working days are in the UK.
To establish the status of residence through the ties, there are no standard days. It also depends on the status of residency of the taxpayer in the previous three years, combined with the UK ties. The main ties that are considered are 'family tie', '90 days tie', 'accommodation tie' and the 'work tie'. For simplicity and better understanding, just look at the table below.
R Resident NR Non-tax Resident
LEGAL ENTITY (COMPANY)
Another important issue is the legal entities (companies).
Many believe that if a company was formed in England and its only registered office is in England, it is always and exclusively subject to UK tax. This however is a false belief as it may be the general rule but there are always exceptions.
The exceptions in general.
A company can be taxed abroad (outside the UK) when central management and control are performed abroad (for example in Greece). Based on the bilateral agreement of that example and to the relevant international guidelines such as INTM120000, (see also INTM120200 and INTM120180) the company is automatically defined as an entity subject to Greek taxation.
Although in many cases the decisions are made in England, some times due to real practice and other in order to maintain their tax status, there are still exceptions. When we speak of management and control, the definition does not only apply to the basis of the executive management and the control itself but also to where the real power of the company's control belongs to.
One example of this is when one is the nominee of a company, acts as the executive and makes decisions in England but in reality, it is the shareholders who manage and control the company while they live abroad. Based again on INTM120200 the term “management” can also refer to “supervisory management” ('passive oversight'), meaning that the nominee executes the decisions made by the shareholders. As a result, the company is not subject to UK taxation.
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Translated / Edited by, Apostolia Nestoratou.
© 2017 UPECO LTD
Attention! This article is intended to give only a general informative picture and should not, in any case, be taken as a rule. Each case has always a personalized nature. HMRC has issued more than 100 pages of manuals on this topic and it is strongly recommended to study it with the help of your accountant before making any decisions.