An Organisation for all
Accountants in Practice

Technical Guide on Scottish Taxpayer Status

By HMRC

Introduction

1.  The Scottish rate of income tax (SRIT), as introduced by the Scotland Act 2012, will be charged on the non-savings and non-dividend income of those defined as Scottish taxpayers and will start from 6 April 2016.

2.   The definition of a Scottish taxpayer generally focuses on the question of whether the taxpayer has a “close connection” with Scotland or elsewhere in the UK. The existence of that “close connection” will usually be determined by where an individual has his or her place of residence in the course of a tax year.

Common misconceptions

  • None of the following factors will cause an individual to be a Scottish taxpayer if their place of residence is outside of Scotland.
  • National identity – regarding oneself to be Scottish
  • Location of work – working in Scotland
  • Location of income source – receiving a pension or salary from a Scottish entity
  • Travelling in Scotland – driving a lorry in or frequent work visits to Scotland

3.  For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.

4.  Whether or not an individual is a Scottish taxpayer will not, however, be simple in all cases. This technical material provides guidance on the manner in which HMRC will interpret some of the terms used in the sections of the Scotland Act 2012, which set out the definition of a Scottish taxpayer.

Definition of a Scottish Taxpayer

5.  The Scotland Act 2012 inserts new sections 80D-80F into the Scotland Act 1998 which define who will be a Scottish taxpayer for the purposes of SRIT.

6.  In order for an individual to be a Scottish taxpayer, they must be UK resident for tax purposes – an individual who is not UK tax resident cannot be a Scottish taxpayer

7.  There are a number of tests to determine Scottish taxpayer status. If, in the course  of a tax year, an individual is UK resident for tax purposes, they will be a Scottish taxpayer, for that tax year, if they satisfy any of three tests

A.  They are a Scottish Parliamentarian

B.  They have a “close connection” to Scotland through either:

  • having only a single “place of residence”, which is in Scotland; or
  • where they have more than one “place of residence”, having their “main place of residence” in Scotland for at least as much of the tax year as it has been in any one other part of the UK.

C.  Where no “close connection” to Scotland or any other part of the UK exists (either through it not being possible to identify any place of residence or a main residence) - through day counting.

8.  Place of residence is clearly therefore key to establishing whether an individual is a Scottish taxpayer.

Place of Residence

9.  In the vast majority of cases the key aspect of the test for Scottish taxpayer status rests on establishing an individual’s place of residence.

10.  This term is not defined by the legislation so must be given its ordinary meaning. For an individual its ordinary meaning is the dwelling in which that person habitually lives: in other words his or her home. As such, it should be regarded as having similarities to the concept of “home” within the Statutory Residence Test.

11.  This interpretation is supported by considerable case law, albeit relating to similar but not identical concepts elsewhere in law.

N.B. An individual’s election of ‘main residence’ for CGT purposes will not determine ‘main place of residence for Scottish taxpayer status purposes.

 Relevant Tax Case Law

12.  The concept of “a residence” is used in various areas of tax legislation, in particular Capital Gains Tax private residence relief (in relation to which there are many tax cases) which are of relevance to interpreting “residence” in the context of Scottish taxpayer status.

13.  In Sansom v Peay (52TC1) Brightman J summarised the purpose of private residence relief as,

“To exempt from liability to Capital Gains Tax the proceeds of sale of a person’s home.” 

14.  In Frost v Feltham (55TC10), where (in the context of interest relief) the Court was asked to decide which of an individual’s residences was his main residence, Nourse J stated,

“A residence is a place where somebody lives.” 

15.  These quotations clearly emphasise the point that a residence is where an individual lives - their ‘home’. There is, however, no minimum period of occupation that would enable an individual to establish a residence.

16.  This was confirmed by Millet J in Moore v Thompson (61TC15) where he stated,

“It is clear that the Commissioners were alive to the fact that even occasional and short residence in a place can make that a residence; but the question was one of fact and degree for the Commissioners.” 

Every case must be decided upon its own particular facts.

17.  The meaning of the word ‘residence’ was considered further in the case of Goodwin v Curtis (70TC478).

18.  In 1983 Mr Goodwin set up a company to acquire Hazleton Manor Farmhouse. At that time he was buying it with a view to making it a home for himself and his family. On 1 April 1985 Mr Goodwin acquired the farmhouse from the company, but prior to the completion of his purchase he had instructed agents to sell the farmhouse. At the time of his acquisition he had separated from his wife and he took up temporary residence in the farmhouse until 3 May 1985 when the farmhouse was sold. Mr Goodwin contended that the farmhouse was his only or main residence.

19.  In the High Court, Sir John Vinelott drew heavily on the observations of Lord Denning and Widgery L.J. in Fox v Stirk, Ricketts v Registration Officer for the City of Cambridge [1970] 3 All ER 7, (see page 16) and he also quoted with approval the line taken by Brightman J in Sansom v Peay (52TC1). Sir John said,

Amongst the factors to be weighed by the Commissioners are the degree of permanence, continuity and the expectation of continuity. On the facts found by the Commissioners in this case……in my judgment, they were fully entitled to take the view that the farmhouse was used not as a residence but as mere temporary accommodation for a period that the taxpayer hoped would be brief and which in fact lasted some 32 days between completion of the sale to him and the completion of the sale by him.” 

20.  The Court of Appeal upheld the decision of the Commissioners and the High Court that Mr Goodwin had not established a residence in the farmhouse; it had merely provided temporary accommodation. Millett L J stated in the Court of Appeal,

“What I derive from Viscount Cave’s speech is that the word ‘reside’ is an ordinary word of the English language and is eminently suitable for a lay tribunal such as the General Commissioners to apply.” He went on,“they (the Commissioners) must be taken to have accepted the Revenue’s submission that the quality of the taxpayer’s occupation of the farmhouse did not have a sufficient degree of permanence, continuity or expectation of continuity to justify its description as residence.”

And later,“Temporary occupation at an address does not make a man resident there. The question whether the occupation is sufficient to make him resident is one of fact and degree for the Commissioners to decide.”

He went on to say,“The substance of the Commissioners' finding taken as a whole, in my judgment, is that the nature, quality, length and circumstances of the taxpayer's occupation of the Farmhouse did not make his occupation qualify as residence.” 

Schiemann LJ added,

“I agree with the judgment that has just been delivered. I accept, as did the Commissioners, the Crown’s contention that in order to qualify for the relief a taxpayer must provide some evidence that his residence in the property showed some degree of permanence, some degree of continuity or some expectation of continuity.” 

Relevant Non-Tax Case Law

21.  Outside the field of taxation there are many circumstances in which the identification of an individual’s residence is important. Whilst the meaning of a phrase must always be considered by reference to the particular legislative context in which it is used, the following cases illustrate important factors that should be considered when considering whether a location constitutes “a place of residence” for the purposes of Scottish taxpayer status.

22.  One such example is the identification of the constituency in which an individual is resident for the purpose of voting. Under the Representation of the People Act 1948, entitlement to vote was given to persons resident in a constituency on a qualifying date. In the case of Fox v Stirk, Ricketts v Registration Officer for the City of Cambridge [1970] 3 All ER 7 the Court of Appeal considered whether students should be resident in the constituency of the University that they attended. In his judgment, Lord Denning M.R. cited a passage from the speech of Viscount Cave L.C. in Levene v. Inland Revenue Commissioners [1928] AC 217 (a case which did relate to tax law)

“... the word 'reside' is a familiar English word and is defined in the Oxford English Dictionary as meaning 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.” 

Lord Denning went on to say“I derive three principles. The first is that a man can have two residences. He can have a flat in London and a house in the country. He is resident in both. The second principle is that temporary presence at an address does not make a man resident there. A guest who comes for the weekend is not resident. A short stay visitor is not resident. The third principle is that temporary absence does not deprive a person of his residence. If he happens to be away for a holiday or away for the weekend or in hospital, he does not lose his residence on that account.” 

Further to this Lord Widgery commented,“This conception of residence is of a place where a man is based or where he continues to live, the place where he sleeps and shelters and has his home. It is imperative to remember in this context that 'residence' implies a degree of permanence. In the words of the Oxford English Dictionary, it is concerned with something which will go on for a considerable time. Consequently a person is not entitled to claim to be a resident at a given town merely because he pays a short, temporary visit. Some assumption of permanence, some degree of continuity, some expectation of continuity, is a vital factor which turns simple occupation into residence.”

Meaning of “place of residence” for Scottish taxpayer purposes

23.  Based on case law, this part of the guidance provides information about how HMRC interprets the term ‘place of residence’ in the context of applying the definition of a Scottish taxpayer to an individual’s circumstances.

24.  For the purpose of Scottish taxpayer status HMRC consider that an individual’s ‘place of residence’ is a place that a reasonable onlooker, with knowledge of the material facts, would regard as the dwelling in which that person habitually lives: in other words his or her home.

25.  As the meaning of ‘place of residence’ can vary according to its context it is not possible for this guidance to provide an absolute definition of the term. What the following section of this guidance does is to give indicators outlining the characteristics that ‘a place of residence’ will generally have.

26.  Some general examples are given of what a place of residence may or may not be; whether a place is or is not a place of residence’ will always be dependent on the facts and circumstances of its use by the individual. HMRC may choose to enquire into those facts and circumstances.

27.  The concept of ‘place of residence’ as described in this guidance relates only to the Scottish taxpayer status. The guidance does not apply for the purpose of applying the concept of residence as used in other aspects of tax law

 “Place of residence” - Principles and characteristics for Scottish Taxpayer Status

It is possible to have more than one place of residence. 

28.  The vast majority of people will have only one place where they live and this will be their place of residence. If an individual has more than one place to live then each of those places may be a place of residence. In this situation, whether or not either location constitutes a place of residence will be determined by the facts.

Example

29.  Jenny lives in Birmingham and works from home. She also owns a small house on Skye which she lives in throughout every summer, from April to September. Her use of both properties is sufficiently regular and permanent to mean that both are places of residence (see also para 40).

A place of residence can be a building (or part of a building), a vehicle, vessel or structure of any kind as long as it is used by an individual with a sufficient degree of regularity and permanence.

Example

30.  Harry lives on a narrow boat with his wife. While they occasionally travel on the boat, they have a single permanent mooring in London where they spend the vast majority of their time. They keep their personal belongings in the boat, eat their meals there, and with the exception of their annual holiday abroad, sleep in it every night. It is their place of residence. Similar considerations would apply if Harry and his wife lived in a static caravan.

Ownership or a legal form of tenancy makes no difference

31.  A building, vehicle, vessel or structure, or the like, can be an individual’s place of residence even if it is not owned by them. Ownership or a legal form of tenancy makes no difference e.g. a property that an individual rents or in which an individual lives with their parents, another member of their family or others will be a place of residence if they habitually live there.

A place of residence will remain an individual’s place of residence until such a time as it stops being used as such by them.

Example

32.  Paul has business interests in both England and the Scotland. He flies to England each Monday returning to Scotland every Thursday. In England he lives in a flat. When in Scotland he lives with his family at the family home which he has occupied for many years. In this situation both properties are places of residence. Paul subsequently decides he does not need to spend so much time in England and starts to travel there less frequently. He sub-lets his flat in England retaining no rights to use it, choosing instead to stay in whatever hotel can accommodate him. He now has only one place of residence, which is in Scotland.

A place can still be a place of residence even if an individual does not stay there continuously. E.g. they move out temporarily but their spouse and children continue to live there, then it is still likely to be their place of residence.

Example

33.  Joanne is seconded to Scotland for 3 months by her English employer. She stays in a hotel when she is there. Prior to her secondment she lived with her husband in their home in London. Her husband continues to live and work in the London. When Joanne returns after her secondment she returns to live with her husband in their London home. The London house was Joanne’s place of residence throughout the period of her secondment.

It should be noted that an individual having one place of residence (in any part of the UK) does not mean, when taken in isolation, that if their family do not visit, as they live in another of the individual’s places of residence, the former cannot be a place of residence.

If an individual moves out of their home temporarily it may still remain their home.

 Example

34.  David has lived and worked in Dumfries for many years. David’s father lives in Carlisle and falls seriously ill. For a period of several months David moves back to his parents’ house in Carlisle to help his mother while his father is in hospital and then after his return home with his recuperation. Although David has temporarily moved out of his Dumfries home this does not stop being his place of residence.

A place of residence will remain as such even if it is temporarily unavailable, for example, because of damage or renovation.

Example

35.  The roof of Richard and Mary’s home in Dunblane blows off in a storm. The estimated clean-up and repair operation will take 10 weeks, so they stay with Mary’s parents in Gateshead while the work is being done. The Dunblane property will remain their place of residence even though Richard and Mary are unable to stay there for the time being.

A property will start to be an individual’s place of residence as soon as:

  • it is capable of being used as a home, for example, the individual has taken ownership of it, even if it is temporarily unavailable because of renovation.
  • the individual actually lives there

If the first point above is satisfied, but in fact the individual never actually lives there, then it will not constitute a place of residence.

Example

36.  Melanie moved from Scotland to England and completed the purchase of her new house on 1 May. Whilst it was empty she stayed with friends, until her belongings arrived. These were moved in by the removal firm on 23 May. Melanie stayed in her new home overnight that night. However, as she had arranged to have some extensive refurbishment done to her bathrooms and kitchen, she stayed in a local hotel and with colleagues whilst the main works were carried out. She moved into her home on a permanent basis on 10 June. For Scottish taxpayer ’close connection purposes HMRC would consider that the house became Melanie’s place of residence from 23 May.

The key points are that:

  • a place must be capable of being used as a home, even if it is temporarily unavailable, and
  • an individual must actually use it as a home

What is not considered to be a place of residence for Scottish taxpayer/’close connection purposes?

 If an individual moves out of their home completely and makes it available to let commercially it will not be their place of residence during the period it is let unless they or their family retain a right to live there and exercise that right. This can happen, for example, where the rental agreement permits the individual to use the property or part of the property as living accommodation.

Example

37.  Chris left Scotland to work in England. He lets the flat he previously lived in to a tenant on a 2-year lease. After 18 months he was made redundant and returned to Scotland. The rental agreement on his flat gave exclusive use of the property to the tenant so Chris arranged to stay with relatives and friends until the lease expired. For the period his property was let it is not his place of residence.

However, if the rental agreement had allowed Chris to use the flat and he had stayed there when he visited Scotland it would have remained a place of residence throughout.A place that has never been capable of functioning as a habitable residence cannot be a place of residence. For example, a property purchased in such a state of disrepair that it is not capable of being lived in, is not a place of residence until such time as it becomes habitable.

Example

38.  Daniel lives in rented accommodation in Glasgow. He bought a derelict house in Aberdeen with the intention of moving in once it had been fully renovated and repaired. He employed builders to undertake the necessary work but only a short time afterwards Daniel’s business folded, requiring him to sell the house in Aberdeen to clear his debts. Since it was never capable of habitation as a home, the property in Aberdeen never constituted a place of residence for Daniel.

If an individual completely moves out of a property and makes no further use of it whatsoever it will no longer be a place of residence for them.

Example

39.  Harry’s new job requires him to travel extensively around the UK. He spends some time working in Scotland but most of his work is carried out elsewhere in the UK. He decided to sell his Scottish property. On 3 June he put his furniture and belongings in storage and 2 weeks later he handed the keys to his estate agent. He did not return to his Scottish property after 3 June and stayed in hotels or with friends on the occasions when he came back to Scotland. The property is not a place of residence for him from 3 June, the date he put his furniture and belongings in storage.

A property which is used as nothing more than a holiday home, temporary retreat or something similar is not a place of residence. So a holiday home where an individual spends time for only occasional short breaks, and which clearly provides a distinct respite from their ordinary day to day life will not be a place of residence. However if there comes a time when an individual’s use of a holiday home or temporary retreat changes so that it is used more frequently and for longer periods of time it will become a place of residence from the time of the change.

Example

40.  Jenny lives in Birmingham and works from home. She also owns a small house on Skye which she rents out apart from 2 to 3 weeks a year when she takes her holiday there. The Skye property is not a place of residence. (See para 29)

A property, vehicle or other ‘home’ that an individual never stays in will not be a place of residence for them. For example a property purchased solely as an investment or a property bequeathed to an individual and which they never stay in will not be a place of residence. This point is further reinforced by “close connection” test set out in s.80E Scotland Act 2012 making clear that “living” at a place is necessary to establish a “close connection”.

Example

41.  Jamal purchases a house in Aberdeen as an investment. Although the property is furnished it is currently standing empty because he cannot find a suitable tenant. Jamal has never stayed in the property. The Aberdeen house is not a place of residence for him.

 Meaning of “Main place of residence

42.  Where, in a tax year, an individual has two or more “places of residence” in the UK, Scottish taxpayer status will be dependent on whether a “close connection” with Scotland or another part of the UK exists. Central to that test is establishing an individual’s “main place of residence”.

43.  A “main place of residence” is not necessarily the residence where the individual spends the majority of their time, although it commonly may be. A “main place of residence” is the “place of residence” with which the individual can be said to have the greatest degree of connection.

44.  Whether a place constitutes a “main place of residence” is a matter of fact and all of the facts and circumstances of the particular case must be considered to arrive at a conclusion.

45.  The following points, although not exhaustive, may be useful in establishing whether a place constitutes a “main place of residence” for a given tax year.

In using the list it is important to remember that the factors appear in no particular order; that the relevance of points will vary from individual to individual and that the list does not form a “box-counting” guide to Scottish taxpayer status:

  • If the individual is married, in a civil partnership or a long-term relationship, where does the family spend its time?
  • If the individual has children, where do they go to school?
  • Location of social/non-work activity i.e. club membership/participation, hobbies, etc?
  • How is each residence furnished?
  • Where are the majority of the individual’s possessions kept?
  • Where is the individual registered with a doctor /dentist/optician?
  • Which address is used for correspondence?

Banks & Building Societies, credit cards, utility bills, etc

  • At which address is the individual’s car registered and insured?
  • Which address is the main residence for council tax?
  • At which residence is the individual registered to vote?

Tests for Scottish Taxpayer Status

46.  The Scotland Act sets out a number of tests to determine whether an individual is a Scottish taxpayer.

47.  In order for an individual to be a Scottish taxpayer, they must be UK resident for tax purposes – an individual who is not UK tax resident cannot be a Scottish taxpayer.

48.  An individual will be a Scottish taxpayer if they satisfy any of the following tests:

A.  They are a Scottish Parliamentarian

B.  They have a “close connection” to Scotland, through either:

i)   having only a single “place of residence”, which is in Scotland; or

ii)   where they have more than one “place of residence”, having their “main place of residence” in Scotland for at least as much of the tax year as it has been in any one other part of the UK.

C.  Where no “close connection” to Scotland (or any other part of the UK)  exists (either through it not being possible to identify any place of residence or a main residence) - through day counting.

49.  “Part of the UK” is to be interpreted as Scotland, England, Wales and Northern Ireland but not Isle of Man/Channel Islands.

50.  If an individual is identified as being a Scottish taxpayer that status applies for a whole tax year - it is not possible to be a Scottish taxpayer for part of a tax year.

51.  However, it should be noted that, in a year that the individual becomes or ceases to be UK tax resident the extent to which income in that tax year is subject to income tax at the Scottish rates remains subject to ‘split year’ treatment under the statutory residence test.

Scottish Taxpayer Test A - Scottish Parliamentarian

52.  All Scottish Parliamentarians will be Scottish taxpayers regardless of where they live.

53.  An individual is a Scottish Parliamentarian for a tax year if, for the whole or any part of that tax year, they are:

  • a member of Parliament for a constituency in Scotland, or
  • a member of the European Parliament for Scotland, or
  • a member of the Scottish Parliament

54.  Where an individual is a Scottish Parliamentarian no further tests need be considered as whether the individual in question will be a Scottish taxpayer for the tax year in question.

SCOTTISH TAXPAYER TEST Bi

  “Close connection to Scotland” – Single place of residence

N.B. - In order for an individual to be a Scottish taxpayer, they must be UK resident for tax purposes – an individual who is not UK tax resident cannot be a Scottish taxpayer

Single place of residence

55.  Where an individual has just one place of residence in the UK in the course of a tax year and that place of residence is in Scotland, they will have a “close connection” to Scotland and be a Scottish taxpayer for that tax year.

56.  Where that place of residence is located in another part of the UK they will have a “close connection” to that part of the UK and will not be a Scottish taxpayer.

57.  Where a close connection to Scotland or any other part of the UK is established using this test no further tests need be considered as whether the individual in question is or is not a Scottish taxpayer will have been established.

Examples (see paragraph 28 onwards for examples of the principles behind what constitutes a “place of residence”)

“National identity”

58.  David and Alice are twins born and brought up in Glasgow, where they have both lived the vast majority of their lives. David lives in a flat in Glasgow. Alice moved to England for work purposes some years previously and lives in a house in Manchester.

59.  While both David and Alice regard themselves as Glaswegians this is not relevant to determining Scottish taxpayer status. Only their place of residence, where they live, is relevant to establishing their Scottish taxpayer status. David is a Scottish taxpayer, Alice is not.

Location of work

60.  Throughout the whole of the tax year Sharon lives in a flat in Carlisle but is employed by a company based in Dumfries, where her office is situated.

61.  The location of an individual’s employer or where they work is not relevant to deciding Scottish taxpayer status. Only Sharon’s place of residence, where she lives, is relevant to establishing her Scottish taxpayer status. Sharon is not a Scottish taxpayer.

Location of income source

62.  Ravi is retired and lives in Liverpool. As well as his state pension Ravi also has a monthly income from a private pension provided by an Edinburgh based pension firm and a work pension from his time as a teacher in Glasgow.

63.  Neither the location of the pension provider from whom a pension is received nor the location of the employment from which a pension derives is relevant to deciding whether you are a Scottish taxpayer. Only Ravi’s place of residence, where he lives, is relevant to establishing his Scottish taxpayer status. Ravi lives in Liverpool so is not a Scottish taxpayer.

Regular travel

64.  Throughout the whole of a tax year, Mohammed lives with his wife in Huddersfield and works as a long distance lorry driver. His work regularly takes him away from home for days at a time, travelling across the UK, driving overnight, often in Scotland.

65.  Notwithstanding his spending considerable time in many different parts of the UK, especially in Scotland, driving or even sleeping, in his lorry overnight does not mean it constitutes a place of residence. Only Mohammed’s place of residence – his home in Huddersfield is relevant to establishing his Scottish taxpayer status. Mohammed is not a Scottish taxpayer.

SCOTTISH TAXPAYER TEST Bii

 “Close connection to Scotland” – Two or more places of residence in the UK 

66.  Where, in the course of a tax year, an individual has more than one place of residence in the UK (either through a move from a single place of residence to another or by having more than one place of residence throughout the tax year), they will have a “close connection” with Scotland and be a Scottish taxpayer, if their main place of residence has been in Scotland for at least as long as it has been in any other individual ‘part of the UK’.

67.  Part of the UK is to be interpreted as Scotland England, Wales and Northern Ireland.

68.  Where, in the course of a tax year, an individual has more than one “main place of residence” but all in the same part of the UK, they will have a “close connection“, to that part of the UK. If that part of the UK is Scotland they will be a Scottish taxpayer

69.  Where in the course of a tax year, an individual has a “main place of residence” both in Scotland and elsewhere in the UK, (this may occur through a move from a single place of residence to another; or where there is more than one place of residence throughout the tax year) - whether a “close connection” with Scotland exists will be determined by whether his or her main place of residence was in Scotland for at least as much of the year as it was in any one other part of the UK

70.  It is important to note that, for the purposes of this test, the time for which a main place of residence was in Scotland during a particular tax year is compared to the time for which it was in England, Northern Ireland or Wales individually during the course of that year not in aggregate.

71.  Where a close connection to Scotland or any other part of the UK is established using this test no further tests need be considered as whether the individual in question is or is not a Scottish taxpayer will have been established.

Examples

N.B. – Whether a residence constitutes a ‘main place of residence’ for the purposes of Scottish taxpayer status is a qualitative, rather than quantitative test. The examples are provided by way of illustration but the addition or subtraction of factors may lead to different answers to the question of Scottish taxpayer status.

More than one place of residence – all in same part of the UK

72.  Angela has owned and lived at a house in Falkirk for a number of years – this is her sole place of residence. In June she sells her house in Falkirk and moves into rented accommodation in Stranraer where she stays until December when she moves into a new house she has purchased in Inverness.

Angela has had more than one place of residence in the course of the tax year, each in different parts of Scotland. However, since all of the places of residence have been in Scotland she is a Scottish taxpayer.

More than one place of residence – move from one single place of residence to another

73.  Donovan has rented and lived at a house in Birmingham for a number of years – this is his sole place of residence. On June 30th he stops renting the Birmingham property and purchases a flat in Aberdeen, moving in immediately and living there for the rest of the tax year.

In the course of the tax year Donovan has two places of residence – one in Birmingham and one in Aberdeen. On the basis that Donovan’s place of residence was in Scotland (Aberdeen) for a greater period of time (July-April 5th) than it was in any other part of the UK (England – Birmingham from 6th April to June 30th ), Donovan has a close connection to Scotland and is a Scottish taxpayer for the whole of the tax year.

Were the order of the moves to be reversed (i.e. Aberdeen to Birmingham) but the dates stay the same then Donovan would not be a Scottish taxpayer as, on the basis the length of time at each place of residence, a close connection to England would exist.

74.  Emily has owned and lived at a house in Fort William for a number of years – this is her sole place of residence. In the course of the year she sells her house in Fort William and moves into rented accommodation in Swansea where she stays until moving into a new house she has purchased in London. The period of time each location constituted her place of residence in the course of the tax year was as follows: Fort William 125 days, Swansea 115 days and London 115 days.

Emily is a Scottish taxpayer, for the whole of the tax year, on the basis that the period of time for which her place of residence was in Scotland was a least as great (and in this case greater) than the periods of time her place of residence was in any one of the other parts of the UK.

More than one place of residence – more than one place of residence at any given time

75.  Where at any given time an individual has more than one place of residence the establishment of a ‘close connection’ rests on which place of residence constitutes the individual’s ‘main place of residence’. It is in considering this status that illustrative factors outlined at paragraph 45 are of relevance.

76.  Bob is single and has worked and owned a flat in Carlisle for many years. He is a member of various clubs and social groups in the city. However, Bob also owns a house outside of Oban, where he likes to go walking and fishing most weekends and for longer in the summer holidays. Both properties are furnished with Bob’s possessions but his doctors, dentist and opticians registration are all in Carlisle.Bob has two places of residence but his main place of residence is in Carlisle, as this is the residence with which he has the closest connection, both in terms of social and functional links and in which he spends the most time. Bob is therefore not a Scottish taxpayer.

77.  Jane has a family home in Kilmarnock with her husband and children but works in Cardiff. To avoid the commute she rents a flat in Cardiff which she furnishes herself and where she keeps some of her possessions and stays during the week, returning to the family home in Kilmarnock each weekend. All the friends that Jane sees socially live in or around Kilmarnock and she is a member of various local sports and social groups in the town.

Despite having a place of residence in Cardiff throughout the tax year, Jane’s main place of residence, by virtue her family, social and other links, is her family home in Kilmarnock. Jane therefore has a “close connection” to Scotland and is thus a Scottish taxpayer.

78.  Solomon is a student at university in Glasgow, living in a house with friends from his course. He works part-time to help cover his rent and tuition fees and his name is on the phone and utility bills for the house. His parents live in Norwich and he returns to the family home outside of every term time. The correspondence address on his bank and credit card accounts are the family home in Norwich, most of his possessions are there and he is doctors and dentists registration are also in Norwich.

Solomon’s main place of residence, the place with which he has closest connection is his parent’s house, his family home in Norwich. Solomon is not a Scottish taxpayer.

79.  Rebecca is a student at university in Stirling and lives in a shared house with friends from the course. She works part-time to help cover rent and tuition fees and her name is on the phone and utility bills for the house. Her parents live in Cardiff. The correspondence address on her bank and credit card accounts is still at her parents’ house and many of her possessions are there, however, Rebecca spends her university holidays in the house in Stirling, working full-time, only occasionally staying at her parent’s house.

Rebecca has only one place of residence – Stirling. While she uses he parents’ home for correspondence and many of her possessions are there she spends very little time there so it cannot constitute her place of residence.

80.  Javier is a US Citizen, employed by a US Company. He is sent on a two year assignment to work for a company in Scotland. Javier arrives in the UK on 15th October and under the Statutory Residence Test (SRT) is treated as UK resident for tax purposes, albeit on a split year basis for the year of arrival. Javier rents a house in Scotland for himself in which he lives over the two years of the secondment. His family remain in the US throughout the assignment and Javier returns home to the US for holidays.

Since Javier is treated as UK resident for tax purposes under the SRT it is possible for him to be a Scottish taxpayer. To establish whether he is a Scottish taxpayer or not it is necessary to consider whether he has a place of residence in the UK – Javier’s family residence in the USA is therefore not of relevance. Javier’s sole UK place of residence in the UK is in Scotland, so he has a close connection with Scotland and is therefore a Scottish Taxpayer for the tax year. However, the split year treatment for his year of arrival means that only his income subsequent to his arrival in the UK is subject to the Scottish rate of income tax.

SCOTTISH TAXPAYER TEST C

No “close connection”– “days spent” in Scotland or another “part of the UK” 

81.  Where an individual is UK resident for tax purposes but does not have a “close connection” with Scotland or another part of the UK (either through it not being possible to identify any place of residence or a main residence), they may still be a Scottish taxpayer if they satisfy the requirements of section 80F which operates by way of a test of the number of days spent in Scotland against those spent in “any other part of the UK”.

82.  “Part of the UK” should be interpreted as meaning Scotland, England, Wales and Northern Ireland but not Isle of Man/Channel Islands.

83. Where an individual spends at least as many days in Scotland as elsewhere in the UK they are a Scottish taxpayer.

84.  In other words - days spent in Scotland compared to days spent in England, Northern Ireland, and Wales in aggregate rather than to days spent in each of those parts of the UK individually.

85.  For these purposes Scotland includes the adjacent UK territorial waters (i.e. up to 12 nautical miles from the shore), but does not include the adjacent UK continental shelf. Days spent in the UK continental shelf (for example on an oil rig or similar installation) are not days spent in any part of the UK for these purposes.

Note - this is a different test to that used to establish “close connection” where an individual has had, in any given tax year, “places of residence” or a “main place of residence” in more than one of the constituent regions of the UK (England, Wales, Scotland & Northern Ireland). In such cases days where the residence is in Scotland are considered separately against days where the residence is in each region individually.

What is meant by a “day spent”?

86.  Where an individual has spent a day is decided by where they are at the end of the day (midnight).

87.  However, where an individual is in a part of the UK at midnight merely because they are in transit, that day does not count as a “day spent” in that location.

88.  An individual is to be considered as in transit when travelling from one country outside the UK to another country outside the UK, and whilst en route:

  • they arrive in the UK as a passenger, and
  • leave the UK the next day; and
  • do not, between their arrival and departure, engage in any activities that are to a substantial extent unrelated to their passage through the UK.

For example, merely taking dinner or breakfast at a hotel, in the normal course of events, would be related to their passage. In contrast enjoying a film at the local cinema, taking part in a work meeting or catching up with friends or work colleagues should be considered substantially unrelated to the individual’s passage through the UK.

“Day Counting” Examples

 More than one place of residence but not possible to identify ‘main place of residence’

89.  Meera and her husband own and run a successful multi-national business. They have no children or close family. Both travel extensively on business, occasionally staying in hotels but usually basing themselves at houses they own in a variety of UK and overseas locations. Despite this travel both are resident in the UK for tax purposes. They are registered to vote at their London residence but seldom stay long at any of their residences and have numerous bank accounts and cars registered at different addresses.

Meera and her husband have numerous “places of residence” but it is not possible to identify one of these as their “main place of residence” – Scottish taxpayer status should be decided for each by a day count for days spent in Scotland and elsewhere in the UK

No place of residence

90.  Ruth is employed by an oil company working four weeks on/four weeks off, on a rig in the North Sea. Ruth is single and has no children. When not on the rig she stays in work-related accommodation near Aberdeen but spend most of her non- working time visiting friends or on holiday. She keeps some of her possessions in storage near Aberdeen but the majority are at her mother’s home in Belfast which she also uses as her address for bank and other correspondence, although she seldom visits.

Ruth has no place of residence. Her Mother’s house is not a “place of residence” as Ruth does not reside there. Neither the rig (even if it is in UK territorial waters) nor the on-shore work accommodation are places of residence as there is little permanence or continuity in their occupation – none of her possessions are kept in them – there is no close connection. Ruth’s Scottish taxpayer status will be decided by day counting.

Days spent in Scotland and other parts of the UK

91.  Stuart is a UK citizen but has no fixed place of residence during the course of a tax year – neither owning nor renting property. He works for consultancy firm advising on IT implementation projects and as such travels round the UK on short term assignments, staying in hotels. In the course of the tax year he spends 120 days in Scotland, 100 days in England, 50 days in Wales and 10 days in Northern Ireland.

Since Stuart has no place of residence during the course of the tax year so the “days” he spends in Scotland are compared against the days he spends in aggregate in other parts of the UK. Since the 120 “days” Stuart spent in Scotland is less than the 160 “days” he spent in another part of the UK he is not a Scottish taxpayer.

Had the number of days Stuart spent in another part of the UK stayed the same but the number of days he spent in Scotland increased to 160 days or more – Stuart would have been a Scottish taxpayer.

Evidence to Establish Whether Scottish Taxpayer Status is Appropriate

92.  For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.

93.  Whether or not an individual is a Scottish taxpayer will not, however, be simple in all cases. Where individuals have more complex living arrangements a range of evidence may assist in identifying whether an individual is or is not a Scottish taxpayer.

Place of Residence & Main Place of Residence 

94.  When considering whether somewhere is a place of residence or main place of residence for the purposes of establishing Scottish taxpayer status, evidence to establish presence at a particular home and whether or not a home existed will be critical. The following information might help establish the facts.

95.  General overheads - utility bills which may demonstrate that an individual has been present in that home, for example, telephone bills or energy bills, which demonstrate usage consistent with living in the property.

  • TV/satellite/cable subscriptions.
  • Local parking permits.
  • Membership of clubs, for example sports, health or social clubs.
  • Mobile phone usage and bills pointing to presence in a country.
  • Lifestyle purchases pointing to time spent at a location or residence – e.g. purchases of food, meals out, social events.
  • Presence of spouse, partner or children.
  • Increases in maintenance costs or the frequency of maintenance, for example having a house cleaned more frequently.
  • Insurance documents relating to that home.
  • SORN notification that a vehicle in the UK is ‘off road’.
  • Re-directed mail requests or the address to which personal post is sent.
  • The address to which a driving licence is registered.
  • Bank accounts and credit cards linked to an address and statements which show payments made to utility companies.
  • Evidence of local taxes, such as Council Tax, being paid.
  • Registration, at an address, with local medical practitioners.
  • Credit card and bank statements which indicate the pattern and place of day by day expenditure.

 The above list is not definitive; no one piece of evidence is likely to definitely demonstrate the existence of a place or main place of residence. The weight and quality of all the evidence, taken together, should be considered.

Published November 2015