UK: HMRC to revise guidance on "Ordinarily resident"

On August 14th, 2009, HMRC declared their intention to revise guidance on ordinary residence in the UK.

The new intended guidance states that:

You will become ordinarily resident in a tax year after your year of arrival if:

• you have been in the UK for three years from the date of your arrival, even though you did not originally intend to stay and have not bought or acquired accommodation on a lease of three years or more – you will become ordinarily resident in the U.K. from the beginning of the tax year in which the third anniversary of your arrival falls.

This represents a change from the previous HMRC guidance  which stated:

You will be treated as ordinarily resident from the beginning of the tax year after the third anniversary of your arrival if you come to, and remain in, the U.K., but  you:

•  do not originally intend to stay for at least three years, and
•  do not buy accommodation or acquire it on a lease of three years or more.

For example, if you arrive in the U.K. on November 20th, 2005, and are still living in the U.K. on April 6th, 2009, you are ordinarily resident from 6 April 2009.

If, after you have come to the U.K., you decide to stay for at least three years from the date of your original arrival, you will be treated as ordinarily resident from:

•  the day you arrive if your decision is made in the tax year of arrival, or
•  the beginning of the tax year in which you make your decision when this is after the year of arrival.

For example, if you arrive in the U.K. on January 3rd, 2006 and decide on May 15th, 2006 to stay permanently. You are ordinarily resident from 6 April 2006.