Are you working?

An update on the statutory residence test in the UK

Read our article in the Cayman Financial Review Magazine, eversion 

In Issue 25 I looked at the proposed new statutory residence test.(More certainty on UK residence?The new rules should have been introduced from 6 April 2012 but this introduction has been delayed until 6 April 2013 while there is a further period of consultation.  

One key issue I highlighted in Issue 25 was the issue of “work” and “working day” and what those terms would mean for expats in Cayman who spend time in the UK.

Will you need to change your working practices or your travel to the UK to ensure you do not become UK resident? Read on.

Working full time abroad

Under the consultation proposals you will be conclusively non-UK resident if:

  • you have left the UK to undertake full time work abroad (like HMRC we will use the acronym “FTWA”);
  • that work covers a period over at least one full tax year;
  • you spend fewer than 90 days in the UK; and
  • no more than 20 of those days are spent working in the UK in each tax year.

“Full time” is defined as an average of 35 hours or more of work per week and a “working day” as any day on which three hours or more of work is carried out. This is a departure from the current rules for FTWA which take into account the distinction between “incidental” and “substantive” duties.

At present there is a limit on the number of days on which “substantive” duties are carried out in the UK. There is no absolute clarity on what this limit is but HMRC issued a statement in March 2011 (highlighted in my article in Issue 24) indicating that, in general, it would accept that individuals undertaking fewer than 10 days of substantive duties in the UK would qualify for FTWA, subject to meeting the other qualifying conditions. Individuals undertaking 10 days or more of substantive duties may still qualify for FTWA but it will depend on the specific facts and circumstances of each case.

Clearly those current rules provide scope for some uncertainty so the government have proposed that the distinction between “incidental” and “substantive duties” be replaced by a simple three-hour rule. Provided that fewer than three hours of work are performed, it does not matter what type of duties are undertaken.

The government believes that using a specific number of hours to define a working day is the best approach to achieve a clear and objective definition for the purposes of the test and emphasises that an objective definition based on the number of hours worked will in some cases be favourable to the taxpayer.

However, the government is willing to consider ways to mitigate this impact and proposes two alternative options.

Option 1: increase the limit of working days permitted in the UK from 20 to 25 working days

The government feels that the consultation proposal of 20 working days is a reasonable level for most individuals who are working abroad full-time and who, overall, can spend 90 days a year in the UK. However, given concerns raised that this is too short a period, it would welcome views during the consultation period on raising this limit to 25 working days. This would allow employees who work full-time abroad greater flexibility and would mean that an employee could carry out two working days a month in the UK during the year.

Option 2: increase the number of hours that constitute a working day from 3 hours to 5 hours

The definition of a working day as three hours is not intended to represent a full working day but is, instead, meant to be indicative of a significant amount of work in a day. The three hour limit is intended to provide a “safe haven” that enables a certain amount of work to be carried out on what is essentially a non-working day.

The government is interested in views on increasing the limit from three to five hours as offering an acceptable balance that would be closer to many individuals’ perception of a “working day”. Increasing the threshold to five hours could also help to reduce the concerns raised about record keeping requirements as it would be easier for an individual to recognise that they had spent a day working in the UK.

What is an average working week?

The government does not propose to change the definition of an average working week from 35 hours or more. It believes this is a reasonable level and is unlikely to prevent individuals who currently qualify for FTWA from doing so under the statutory test. Many full-time employees will work more than this on average.

The government does not believe it would be appropriate to extend FTWA to part-time workers but a part-time worker who is not eligible to claim FTWA will not necessarily be resident in the UK but will, instead, need to consider other parts of the test to determine their residence status.

The government confirms that the requirement will be to work an average of 35 hours or more a week across the whole of the period of full-time work. It will not be necessary to work 35 hours in every week during the period.

It can be made up of a combination of employment, undertaking the duties of an office, or carrying on any self-employed trade, profession or vocation and where an individual holds more than one employment (or works for more than one trade) during the year – either consecutively or concurrently – the hours worked on all employments will be aggregated for the purposes of calculating whether they have met the 35-hour or more threshold and the restriction on working days permitted in the UK.

What is work?

The government proposes that an individual will be working if they are performing the duties of their office or employment or, in the case of the self-employed, doing something in the course of their trade. Clearly, this broad definition is going to cover reviewing and composing emails, business calls, drafting documents, business lunches etc.

Domestic and international commuting and private travel, will fall outside of the definition and so not count as work. However, the government proposes that if an individual carries out any duties of employment or trade during ordinary commuting and private travel, then this should count as work.

In order to determine whether work carried out during travel is UK work or overseas work it is proposed that any work in the UK from the point an individual leaves their starting UK location (eg home or office) to the point they reach an embarkation point in the UK would be UK work with any work from the embarkation point onwards (in most cases boarding their transport) being overseas work.

Conversely, for travel into the UK, any work from the point an individual reaches a disembarkation point in the UK would be UK work. Expats may therefore be able to reduce their work day count if they work on the plane rather than on the ground.


The new statutory residence test is starting to take shape and it may be that in the latest round of consultation the rules become more favourable for expats who return to the UK and undertake some work.

It will be vital to carefully observe the various day count and time limits to ensure that the various tests are not breached and it will be sensible to err on the side of caution when doing anything that could possibly be regarded as being work related.

It is still clear that good record keeping is essential to prove what you have and have not done in the UK – this will include keeping contemporaneous diaries detailing all work undertaken in the UK and retaining email and phone records.