Bye bye NOR... Hello OWR!

People who have come to the UK to work and who travel a lot have known about the concept of Non Ordinary Residence (NOR) as it has allowed them to benefit from significant tax savings. Under that status, one would only pay income tax on income related to UK work as long as foreign income was kept overseas.

The concept of ordinary residence is no more however. It was withdrawn in the last budget with effect from tax year 2013-2014. That's the bad news. The good news however is that it was replaced by the concept of Overseas Workday Relief (OWR). This is one is statutory. The main difference between the 2 is that one cannot benefit from OWR if domiciled (which was not the case with NOR).

The new Statutory Residency Test (SRT)

Currently it can be very difficult to know for sure if one is UK resident or not. The uncertainty has been the reason there has been so many tax cases on that subject, often with a surprising outcome. We have heard about the new Statutory Residency Test (SRT) for a few years now and it looks like it's going to happen next year at last. As a reminder, here is a summary of the current situation today:

If you are not UK resident, you will become UK resident if either applies:

• You are physically present for 183 days or more in a tax year
• You have visited the UK for an average of 91 days per annum over 4 consecutive tax years (you will then be regarded as resident from the beginning of the 5th year)