INTM162040 - UK residents with foreign income or gains: certificates of residence: What HMRC will check - whether the customer is a resident of the UK

Once an Officer has completed the initial checks at INTM162030, the Officer should consider whether the customer is, to the best of their knowledge, a person who is a resident of the UK within the meaning of the Double Taxation Agreement (DTA).

For the purpose of most DTAs, a resident of the UK will mean any person (normally defined as any individual, company or any other body of persons) who is, according to UK domestic law, liable to tax by virtue of their domicile, residence, place of management or any other criterion of a similar nature (INTM153050).

The phrase ‘liable to tax’ means that they only have to be within the general scope to tax (INTM153050 and INTM162070). Charities and pension funds can therefore be regarded as resident even if their income is exempt from tax. Partnerships and other transparent entities are not however regarded as resident because they themselves are not liable to tax (except for some rare exceptions such as the UK/Argentina Double Taxation Convention which specifies that partnerships can be regarded as residents of the UK).

Some DTAs do not specifically use the phrase ‘liable to tax’ (for example the UK/New Zealand Double Taxation Convention). Instead, these DTAs state that a UK resident means any person who is a resident of the UK for the purposes of UK tax. HMRC interprets this also to mean that the person is liable to tax by virtue of their domicile, residence, place of management or any other criterion of a similar nature.

The issue of whether a person is a resident of the UK is a matter of self-assessment which HMRC would only normally challenge through an enquiry into a person’s self-assessment tax return. Detailed guidance as to when individuals, companies and trustees may be considered resident of the UK can be found at the Residence, Domicile & Remittance Basis Manual as well as RDR1, INTM120000 and TSEM1002.

An Officer will not be expected to carry out a detailed review of residence when they receive a request for a Certificate of Residence (CoR). The Officer will usually be able to certify residence so long as they can see that the customer is (or was for the period requested) liable to UK tax by virtue of their residence (for example, by checking the customer’s tax returns or, if no such returns have been submitted yet, the information provided with the request).

However, if HMRC do not have enough information to determine whether a customer is liable to UK tax by virtue of their residence or, despite the self-assessments made by the customer, there are reasonable grounds for believing that the customer may not in fact be a resident of the UK, the request may be refused if sufficient doubt remains following additional correspondence on the issue.

It should be noted that the provision of a CoR (to a customer of any type) will not amount to a formal determination that the customer is a resident of the UK. It will simply be confirmation that, to the best of HMRC’s knowledge, the customer is, or was for the period in question, liable to tax by virtue of their residence. HMRC will still have the right to enquire into a customer’s self-assessment tax return when it is received.

In cases where a company is suspected of being dual resident or where a customer requests a certificate of residence in respect of a branch or permanent establishment, please refer to the guidance at INTM162050 and INTM162060 respectively.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)