If you are a UK resident living outside of the United Kingdom, there are high chances that you will be asked to learn more about RDR3 in order to confirm your UK tax residence status. However, not many people are aware of what an RDR3 status really is and how it typically works. In our article, we will tell you exactly that!
How does one define an RDR3?
RDR3 is a guidance note that the UK UM Revenue and Customs body drafts regarding an individual’s Statutory Residence Test (SRT). It helps ascertain if an individual needs to be taxed as a resident of the United Kingdom or a non-residence, based on their earnings and several other factors that help determine their residence status.
Introduced in 2013, the SRT test includes a series of different rules, tests, and guiding analysis that helps establish the tax status of a UK resident and helps determine how much tax liability they have. Here are the four main components of the SRT –
- Automatic UK Test: This test overlooks the country or countries where you have your permanent home(s). However, taxes are levied accordingly if you work mainly from the UK.
- How much time you spend in the UK: The test ascertains how much time you spend in the UK, personally and professionally. If you spend more than 183 days in the UK within a year, you have been deemed a UK tax resident.
- Significant ties test: This test determines if you have significant UK ties like family members, cousins, or spouses to determine if you will be considered a resident or not. The higher the number of UK ties you have, the higher your chances of being deemed a UK resident.
- Automatic overseas test: This test determines how much time you have spent overseas, that is, outside of the UK. If you have spent most of the time out of the UK, you will be considered a non-resident and will have minimal to no tax liabilities. To be considered a non-tax resident in the last three years, you need to be present in the UK for less than 91 days if you work full time abroad.
Is the coronavirus pandemic treated as an exception in the SRT?
Yes, the HMRC declared that the coronavirus pandemic would be considered an exception as it is known to be an event that is out of an individual’s control. Hence, the pandemic will not affect the UK resident’s tax status. The HMRC body understands that every individual has been affected differently, but all cases related to the virus will be treated equally under the SRT. However, each case will be reviewed independently.
The exception will only be considered if you, as a UK resident, could not leave the country due to the closure of international borders. Here are the four exceptions listed by the HMRC:
- If you have found yourself advised by the government to not travel anywhere from the UK due to the virus
- If you have been quarantined or advised by a doctor or public health advisor to self-isolated within the country due to the virus
- If you have been unable to leave UK borders due to the halt in international travel
- If you have been asked by your employer to return back to your home country, the UK, due to the virus
Six ways to check if you are required to submit a tax return in the UK
If you answer yes to any of the following six questions chances are that you will have to submit a tax return in the UK irrespective of being a UK national or foreign delegate –
- Have you received any untaxed income from a UK source like rentals?
- Was your taxable income in the UK above 100,000 pounds?
- Have you recently sold a property in the UK, like real estate, shares or any other property that requires a capital gains tax to be paid?
- Do you have any income from abroad like rentals, etc.?
- Are you considered a UK tax resident (take the SRT to know the same)?
- Are you in a top management position like the director of any company registered in the UK?
Conclusion
It is essential for each UK resident to determine if they are a UK taxpayer or not. Determining this is possible through the SRT, which will tell you the amount payable to the UK government as taxes. It is always advised to take the help of an expert if you do not understand how to ascertain your tax status and amount.
If you want to learn more about your tax requirements as an expat, request an introduction to speak with a tax and finance professional to ensure you’re not getting your tax issues wrong.
