Statutory Residence Test for Agency Directors: Working Abroad Without Tax Residency Loss

Managing global clients outside the UK? Many agency directors are discovering the operational benefits of international working—but HMRC's Statutory Residence Test can turn these opportunities into expensive tax complications if you're not careful.

The SRT determines whether you're a UK tax resident, affecting everything from income tax rates to capital gains liability. Get it wrong, and you could face unexpected tax bills running into tens of thousands. Get it right, and you maintain the flexibility to work globally whilst optimising your tax position.

How the Statutory Residence Test Works

Unlike the old residence rules that relied on vague concepts, the SRT operates through precise tests with clear thresholds. Think of it as a flowchart: you either pass an automatic test (resident or non-resident) or fall into the "sufficient ties" category where day counts and UK connections determine your fate.

The Automatic Tests Come First

Before diving into complex calculations, the SRT asks simple questions. Spend 183 days or more in the UK? You're automatically resident—no further analysis needed. Have your only home in the UK whilst spending some time overseas? Also automatically resident.

On the flip side, spend fewer than 16 days in the UK (or fewer than 46 days if you weren't resident in the previous three years), and you're automatically non-resident. Work full-time overseas with minimal UK presence? Again, automatically non-resident.

Most agency directors fall between these extremes, triggering the sufficient ties test where strategy really matters.

When Ties Become Critical

The sufficient ties test combines your UK days with connection factors—your "ties" to the UK. Five ties exist, each carrying equal weight, but not everyone can have all five.

Your family tie exists if your spouse or minor children are UK resident and you're not separated. This often proves the most challenging tie for agency directors to manage, as family considerations frequently override tax planning.

An accommodation tie arises if you have accommodation available in the UK for at least 91 days during the tax year and spend at least one night there. This catches many directors who maintain UK properties "just in case" or have arrangements with family members.

The work tie applies if you perform significant work in the UK—generally 40 or more working days. Conference calls from your UK office, board meetings in London, and client presentations all count as UK work days.

Your 90-day tie depends on history: if you spent more than 90 days in the UK in either of the two previous tax years, this tie applies. It creates a trailing connection that affects your position for up to three years.

Finally, the country tie (for arrivers only) exists if the UK is where you spend the most time compared to any other single country during the tax year.

Work Abroad: Your Best Friend or Biggest Trap

The full-time work overseas provisions offer the strongest protection for agency directors, allowing up to 90 UK days whilst maintaining non-resident status. However, the rules are stricter than many realise.

You must work sufficient hours overseas—at least 35 per week on average—with no significant UK work breaks. UK work is limited to 30 days maximum and cannot exceed 25% of your total working time. "Work" includes management activities, client calls, and business development—essentially anything you'd normally be paid for.

Many agency directors fall into the trap of thinking overseas residence is automatic if they live abroad. The work test requires actual measurement of hours and activities, not just good intentions.

Day Counting: The Devil in the Details

Days count if you're present in the UK at midnight, regardless of arrival time or activities. This creates some quirky results: arrive at 11pm and leave at 1am the next day, and you've used two UK days despite being present for just two hours.

However, several reliefs help international workers:

Transit days don't count if you're travelling between overseas destinations and spend less than 24 hours in the UK. This helps directors with global client responsibilities who need to change flights at Heathrow.

Exceptional circumstances can exclude days when circumstances beyond your control prevent departure—think volcanic ash clouds or sudden illness requiring hospitalisation.

Work-related travel gets special treatment under certain circumstances, though the rules are complex and require careful analysis.

Common Traps That Catch Agency Directors

The Accommodation Surprise

Maintaining access to UK property often creates unexpected accommodation ties. This includes properties owned by spouses, arrangements with family members, or even hotel loyalty programmes that guarantee room availability. The 91-day availability test is measured across the tax year, not when you actually use the property.

The Work Allocation Mistake

Directors often underestimate what counts as UK work. Management decisions made during UK visits, client calls taken whilst in London, and even strategic planning sessions all constitute UK work for SRT purposes. The location of the activity matters more than where your employment contract is based.

The Family Complication

Family ties create ongoing challenges when spouses or children change their residence patterns. Many directors plan their own position carefully whilst overlooking family members' status changes that affect their ties.

The Historical Hangover

The 90-day tie means historical UK presence affects your current position for up to three years. Directors who previously spent significant time in the UK may find their options more limited than expected, even after establishing overseas operations.

Planning Strategies You Can Execute

Successful residence planning requires systematic approaches rather than ad-hoc decision making.

Calendar management becomes crucial—not just counting days but optimising when those days are used. Strategic timing of UK visits around accounting periods, board meetings, and client engagements can maximise business effectiveness within residence constraints.

Work allocation systems should clearly distinguish UK and overseas activities. This includes documenting where key decisions are made, the location of management meetings, and the jurisdiction of client relationship management.

Accommodation strategies might involve timing property transactions, managing availability periods, or restructuring ownership arrangements to influence tie positions.

Documentation systems must capture the evidence needed to support your position. HMRC's enquiry powers are extensive, and good contemporaneous records provide the best defence.

The Technology Factor

Modern agencies operate across multiple jurisdictions using cloud-based systems and video conferencing. This creates interesting questions about work location when a director in Dubai manages a team in London serving clients in New York.

HMRC's guidance suggests work location depends on where you physically perform activities rather than where systems are hosted or clients are located. However, the boundaries become blurred with remote management and digital service delivery.

When Professional Advice Becomes Essential

The SRT's mechanical approach might seem straightforward, but the interaction with other taxes creates significant complexity. Deemed domicile rules, capital gains tax reliefs, and various exemptions all influence the optimal residence strategy.

Directors with substantial UK assets, complex shareholdings, or international business interests need comprehensive planning that considers all aspects of their tax position. The cost of getting residence wrong often far exceeds professional planning fees.

Early engagement provides the most opportunities and flexibility. Waiting until you're already overseas limits available options and may create adverse consequences that could have been avoided.

Thinking about working internationally without losing your UK tax advantages? 

Sidekick Accounting can help you with residence planning for agency directors with global operations. We can help you understand the rules, plan your position, and maintain compliance whilst maximising your operational flexibility. 

Book a consultation to discuss your specific situation and explore your options.

‍