UK Res Residence: Day Count Rules idence:

Another good piece of news has been a relaxation of the originally draconian rules on how days are to be counted for the purpose of determining residence. At present, HMRC ignore days of arrival and departure when deciding how many days an individual has spent in the UK in any one year. An individual will be resident in the UK if he spends 183 days or more in any one year or an average of 91 days or more over a 4 year period. In January, the draft legislation provided that both days would count as from April 6. However, HMRC have now announced that the individual must be present in the UK at midnight for that day to count for residence purposes.

Days spent in the UK whilst in transit between two non-UK destinations will also be ignored, even if the passenger moves between airports or between terminals for two different modes of transport, and even if he spends the night in the UK, provided he does not engage in other activities whilst in transit, eg attend a business meeting.

Capital Gains Tax

As previously announced, taper relief and indexation relief will be abolished and all capital gains will be taxed at 18%. The much publicised entrepreneurs’ relief will have effect for disposals of business assets after April 6, 2008. The first £1 million of qualifying gains realised over the lifetime of the individual will be taxed at 10%.

Enterprise Investment Scheme (EIS) Relief

The maximum amount that can be invested in EIS shares in a tax year and qualify for a 20% income tax credit and capital gains tax exemption on subsequent sale is being increased from April 2008 to £500,000.

Income Tax

There was little reference in the Chancellor’s speech to the reduction of the basic rate of income tax from 22% to 20% which was announced in last year’s Budget, but comes into effect from April 6, 2008. For dividend income, the 10% starting rate still applies up to the higher rate and, for savings income, the 10% rate only applies where non-savings income is less than £2,320, so these changes are not as detrimental to lower-earners as was anticipated.