The UK Treasury has decided to postpone the publication of eagerly awaited draft legislation which would have established a statutory residency test.
The legislation had been due to be published in the draft Finance Act 2012 which was published by the Treasury today. However, the Treasury announced it has decided to delay the draft legislation until the Finance Act 2013 and for the test to then take effect from April 2013, rather than April 2012.
In a statement, the Treasury said it decided to postpone the publication in order to give it more time to “consult thoroughly on the detail of these changes well in advance of implementation”.
It added: “The Government is committed to the form of the statutory residence test outlined in consultation. It will make a further announcement around Budget 2012 when it will publish its response to the recent consultation together with a further consultation on policy detail and draft legislation.”
The UK Government’s plans to establish a statutory residency test were first announced in this year’s Budget in April. A consultation document was subsequently published in June, seeking views from the industry on what this should look like.
There has been a mixed reaction so far to the announcement that the statutory residency test will be delayed. Some industry commentators suggest it will create another year of uncertainty for those concerned about the rules, while others are pleased the government will have more time to consult with the industry over the changes.
David Kilshaw, chair of private client advisory, at KPMG in the UK said: “Introducing a statutory residence is a fundamental change to the British tax system and it’s crucial that the authorities get it right.
“Some British expats may react with dismay to the delay as they potentially face another year of uncertainty. But if the end result is a workable, well thought out and sensible test that will stay in place for years (if not decades) and which improves the UK’s attractiveness as a destination for overseas visitors, that is arguably a small price to pay.”
Meanwhile, Christopher Groves, partner in the Wealth Planning team at Withers LLP, argues the delay could have wider ramifications for the UK on the world stage.
“[The statutory residency test] would have removed the considerable uncertainty that currently exists as to when an individual becomes resident in the UK,” he said: “While the Government has indicated that it remains committed to the new test, this delay is a considerable disappointment for individuals seeking clarity on their tax position and is a setback for the UK as it seeks to improve its international competitiveness.”