Many practitioners assume that the enactment of the Statutory Residence Test in FA 2013 has removed any difficulty in determining whether an individual is fiscally resident in the UK because applying the Test is a relatively straightforward matter. In fact, the SRT is riddled with ambiguities and anomalies and determining its application with certainty is often far from simple and is sometimes impossible.
We became aware of a further example of this when a solicitor, himself a noted expert in private client taxation, referred the following situation to us for a second opinion. In our consideration of the matter which follows some personal details of the dramatis personae have been changed to preserve confidentiality.
In the UK fiscal year 2023/24 his client, Mr S, and Mr S’s wife, had both spent 175 days in the UK not having been resident in the UK in any previous fiscal year. They both had an Accommodation Tie and, subject to the application of the Family Tie, no other Ties for the purposes of the SRT. So, because they had spent less than 183 days in the UK in 2023/24, if Mr S and his wife did not have a Family Tie, they would not be UK resident for that year, but if they did, they would (see FA 2013 Sch. 45 para. 19).
In FA 2013 Sch. 45 para. 33(2) provides that:
‘A family tie based on the fact that a family member has, by the same token, a relevant relationship with P is to be disregarded in deciding whether that family member is someone who is resident in the UK for year X.’
So, in determining whether Mr S was UK resident in 2023/24 one ignores the fact that Mrs S has a Family Tie to him and, therefore, if she would not be UK resident ignoring the Family Tie to him, he would not have had a Family Tie in that year.
The same would also apply in reverse in determining whether Mrs S was UK resident in 2023/24.
Mr and Mrs S, however, have a son, Cory, whose eighteenth birthday fell on 6th April 2024. Having previously been educated overseas he became a pupil at a UK boarding school, Dotheboys Hall, in the Michaelmas Term of 2023.
In May 2023, during what was the Trinity Term of Dotheboys Hall, Cory had spent five days in the UK with his parents including a couple of days when he viewed the school and the surrounding area. On 31st August 2023 he arrived at Dotheboys Hall with ten other new boys, a day before the official term began, for an orientation day to explain to the new boys general information about the school, its rules, routines, procedures and layout. He boarded at the school for the rest of the year except during the school holidays. The rest of the school’s pupils, roughly 800 boys, arrived at the school for the Michaelmas Term on 1st September 2023.
The Christmas 2023 and Easter 2024 holiday periods of Dotheboys Hall included 29 days falling before 6th April 2024 of which Cory spent 15 days in the UK with his parents and 14 days in the Swiss Alps on a school skiing trip.
In the UK fiscal year 2023/24 Cory was resident in the UK because he had spent more than 182 days in the UK in that fiscal year (FA 2013 Sch. 45 paras. 3 – 7). For the purposes of FA 2013 Sch. 45 para. 33, which:
‘(1) … applies in deciding for the purposes (only) of paragraph 32(1)(b)
whether a person with whom P has a relevant relationship (a “family
member”) is someone who is resident in the UK for year X.’
FA 2013 Sch. 45 paras. 33(3)-(6) provide that:
‘(3) A family member falling within sub-paragraph (4) is to be treated as
being not resident in the UK for year X if the number of days that he or
she spends in the UK in the part of year X outside term-time is less than
21.
(4) A family member falls within this sub-paragraph if he or she—
(a) is a child of P’s who is under the age of 18,
(b) is in full-time education in the UK at any time in year X, and
(c) is resident in the UK for year X but would not be so resident if the
time spent in full-time education in the UK in that year were
disregarded.
(5) In sub-paragraph (4)—
(a) references to full-time education in the UK are to full-time
education at a university, college, school or other educational
establishment in the UK, and
(b) the reference to the time spent in full-time education in the UK is
to the time spent there during term-time.
(6) For the purposes of this paragraph, half-term breaks and other breaks
when teaching is not provided during a term are considered to form part
of “term-time”.’
In respect of determining whether each of his parents’ had a Family Tie for 2023/24, Cory was a family member within para. 33(3). That was because he was a child of the parent concerned, he had been in full-time education in the UK at a time in the fiscal year 2023/24 and he was resident in the UK for that fiscal year but would not have been so resident if the time he spent in full-time education in the UK in that year were disregarded.
So neither Mr S nor Mrs S would have a Family Tie if the number of days that Cory spent in the UK in the part of the fiscal year 2023/24 outside term time was less than 21. That condition would be satisfied if either the days which Cory spent in the UK in May or the day which he spent in the UK on 31st August 2023 were in term-time for the purposes of para. 33.
In considering whether they were, we started our analysis from the fact that para. 33(6) (see above) is the only definitional provision in respect of the meaning of ‘term-time’ in the SRT and is very limited in its scope. Subject to that provision, therefore, ‘term-time’ is to be construed in accordance with ordinary English usage. The most apposite group of definitions of ‘term’ given in the current online edition of the Oxford English Dictionary is:
‘1.4.a. Law. Each of the four periods in the year (in England and Wales, Hilary,
Easter, Trinity, and Michaelmas term: see the first elements), alternating
with vacations, during which judicial business is transacted. Also
…
1.4.b. ƚ In extended use: the session of a law court during such a period; the
court in session. Obsolete.
In later use perhaps simply a contextual use of sense 1.4a.
…
1.4.c. Each of the periods of the year during which instruction is given in a
school, college, or university, usually separated by a period of vacation.
Also without article.
Hilary term, Michaelmas term, Summer term, Trinity term, etc.: see the first
element. See also Easter term n. 2(b).
…
1.4.d. New Zealand colloquial. In plural. The requirement of attendance and
satisfactory completion of set work as a prerequisite to sitting final
degree examinations, esp. in to pass terms, to fail terms, etc. Cf.
Phrases P.5a.i.’
In this group, definition 1.4.c. is clearly the most apposite so it seemed to us most probable that ‘term-time’ in para. 33(3) refers to ‘each of the periods of the year during which, instruction is given in a school’ etc and that ‘school’ here ‘is to be construed as referring to … [the] … school’, in which the child concerned is enrolled.
In respect of Cory’s five-day visit in May 2023, is it a requirement that the child concerned must be enrolled in the institution concerned on the day on which it is to be determined whether that day is outside term-time? It seemed to us that it is likely the courts would conclude that under ordinary English usage a day would not be referred to as ‘in term-time’ in relation to a child, if the child was not then enrolled in the institution in respect of which the term was set.
In respect of the orientation day, the question is whether a day which did not fall within the term specified by the institution concerned, in which no pupils were being taught by that institution but were only being given general information about its rules, routines, procedures and layout and in which all but less than 2% of the institution’s pupils were absent from the school would be referred to in ordinary English usage as falling within the institution’s ‘term-time’.
We concluded that it would not be referred to in such a manner.
On balance, therefore, we thought it unlikely that the Tribunals or Courts would accept that the days spent in the UK by Cory in May 2023 and on 31st August 2023 were days spent in term-time. We thought it likely, therefore, that Cory had spent more than 20 days (being 21 (5 + 1 + 15)) in the UK in 2023/24 outside term-time with the result that both his parents had Family Ties by reference to him and were both, therefore, UK resident for the fiscal year 2023/24.
As our questioner commented, however, one might argue the contrary; that these days might indeed be referred to in ordinary English usage as being within the relevant term-time and that, therefore, there was an ambiguity which might be resolved in favour of the more favourable construction by referring to the purpose of the rule and the mischief at which it was aimed. That purpose, our questioner said, might be expressed as being to support the private education sector by ensuring that foreign parents were not deterred from sending their children to UK boarding schools.
We were unconvinced that the more favourable construction was compatible with ordinary English usage and, therefore, we were unconvinced that there was an ambiguity which might be resolved by an appeal to the provision’s purpose. We were also unconvinced that in respect of a matter of construction which is likely to be of significance only in such marginal circumstances, the purpose of the provisions could be so broadly stated.
We accepted, however, that it was not impossible that the Tribunals and Courts might take a different view and that it might therefore be worthwhile for the client, if he and his adviser truly thought that the more favourable construction was correct, to adopt that more favourable construction in completing his return. If he did so, however, we suggested that he should make the fullest possible disclosure of the fact that he had done so, the alternative supportable constructions and the reasoning that had led him to adopt the more favourable of them. By making such a disclosure he would gain, in the event that the Tribunal and the Court adopted, as we thought it likely that they would, the less favourable construction, as much protection as possible against the application of the discovery provisions and of penalties.
