TCTM02003 - Entitlement: Residence rules: Present and ordinarily resident

The general rules: present, ordinarily resident and 'right to reside'

Tax Credits Act 2002, section 3(3) and Tax Credits (Residence) Regulations 2003, Reg. 3(1) and Reg. 3(5)

The general rule is that to be treated as being in the United Kingdom for the purposes of CTC and WTC, a person must be both present and ordinarily resident here throughout the period of the award. For new claims on or after 1 May 2004 for the purposes of CTC, to be treated as being in the United Kingdom a person must also have a 'right to reside' in the United Kingdom.

Present in the United Kingdom

The requirement to be present in the United Kingdom is imposed directly by section 3(3) of the Tax Credits Act 2002, which requires that a person be “in the United Kingdom”. On its own, this would require the person to be physically present here on each day throughout the period of an award. However, there are rules to allow entitlement to continue during temporary absences of limited duration. These rules are explained at TCTM02004.

Ordinarily resident in the United Kingdom

The requirement to be ordinarily resident is imposed by regulation 3(1) of the Tax Credits (Residence) Regulations 2003. There are certain exceptions to this requirement, and these are explained at "Ordinary residence: people deported to the UK" (below) and at TCTM02006.

Right to reside in the United Kingdom

The requirement to have a right to reside is imposed by regulation 3(5) of the Tax Credits (Residence) Regulations and only applies to claims for CTC. This requirement does not apply to WTC.

The following groups are regarded as having a right to reside in the United Kingdom when claiming CTC. See TCTM02007

• All United Kingdom nationals and those with a right to reside in the Common Travel Area (which covers the United Kingdom, the Republic of Ireland, the Channel Islands and the Isle of Man)
• All EEA workers legally working in the UK – there are special rules for nationals of the eight central European countries that acceded to the EU on 1 May 2004 and for nationals of Bulgaria and Romania, which acceded to the EU on 1 January 2007 (see TCTM02007)
• All EEA nationals who are self-employed in the UK
• Work-seekers from the pre-1 May 2004 EEA Member States, Cyprus and Malta who have a reasonable chance of finding work and A2 nationals who have been admitted under the Highly Skilled Migrants Programme and who hold a certificate confirming they have unconditional access to the UK labour market.
• Non EEA nationals with permission to stay or remain in the UK.
• All EEA nationals who have a permanent right to reside (see TCTM02007)

The following groups only have a right to reside in the UK if they have sufficient resources not to become a burden on the social assistance system of the UK, that is they are self-sufficient

• A8 nationals and (apart from those admitted under the Highly Skilled Migrants’ Programme) A2 nationals who are looking for work, including those who lose their job before having worked in the UK lawfully and without interruption for a period of 12 months or more and they don’t get another job within 30 days.

All EEA nationals, including nationals of the A8 and A2 countries, who are economically inactive and do not have a permanent right to reside. For these groups, all the claimant's personal circumstances are taken into account when deciding whether they are self-sufficient. Such factors could include whether or not they have claimed social assistance fro the Department for Work and Pensions in Great Britain or the Department for Social Development in Northern Ireland (i.e. Income Support, income-based Jobseeker's Allowance, State Pension Credit).

More detailed guidance is set out in TCTM02007

Special cases

There are special rules for Crown servants posted overseas and their partners (see TCTM02005) and for nationals of EEA member states and their partners who are living in another EEA country [DN – need to have a reference to the technical guidance on common provisions, once agreed] (see TCTM02007).

Meaning of “ordinarily resident” for tax credits

The term “ordinarily resident” is not defined, but its established meaning is that a person is ordinarily resident if they are normally residing in the United Kingdom (apart from temporary or occasional absences), and their residence here has been adopted voluntarily and for settled purposes as part of the regular order of their life for the time being.

In considering whether a person is ordinarily resident, all the circumstances of the particular case will need to be considered.

“Ordinary residence” is a concept, which is also used for income tax and national insurance and child benefit. For guidance on the meaning of “ordinarily resident” for tax purposes, see the Residence Manual. For guidance on its meaning for national insurance, see the National Insurance Manual. For guidance on its meaning for child benefit, see the child benefit technical manual. For tax credits, the guidance here should be used.

Making decisions about whether a person is ordinarily resident

When considering whether a person is ordinarily resident for the purposes of an initial decision (under section 14 of the Tax Credits Act 2002) or a revised decision (under section 15 or 16), the facts will need to be considered as they apply at the time. When making final decisions (under section 18) at the end of the year, consideration should be given to whether the decisions made during the year were correct based on the facts as they stood at the time those decisions were made. For example, if a person intended to stay in the United Kingdom for several years at the time the initial decision on his claim was made and it was therefore decided that he was ordinarily resident, that decision should not be changed simply because, in the event, he did not remain in the United Kingdom.

More generally, decisions about entitlement for a year should not be adjusted retrospectively if people end up spending more, or less, time in the United Kingdom than was reasonably expected at the time those decisions were made. Decisions about entitlement must be based on the facts as they exist at the time.

However, none of this means that a decision cannot be revisited where it turns out that the facts at the time were different from the facts as they were understood to be when the decision was made.

Ordinary residence: what to consider

A person is ordinarily resident if they are normally residing in the United Kingdom (apart from temporary or occasional absences), and their residence here has been adopted voluntarily and for settled purposes as part of the regular order of their life for the time being. Decisions about whether a person is ordinarily resident will need to be based on all the circumstances of the particular case.

A person can be ordinarily resident in more than one country. The fact that a person might be said to have a home in another country does not mean that they cannot also be ordinarily resident in the United Kingdom.

If a person lives in the United Kingdom year after year, they should be treated as ordinarily resident here.

Ordinary residence: coming to live in the United Kingdom

When considering whether a person coming to the United Kingdom is ordinarily resident here, we are trying to decide whether they have come to live here as part of the regular order of their life for the time being. Often it will be obvious. On other occasions, there will be a need to consider all the relevant factors in order to build up an overall picture of the person’s position.

Examples of factors which may be relevant are given below. These factors may help to indicate whether a person is ordinarily resident or not. Normally, no one factor on its own will determine that a person is, or is not, ordinarily resident. A decision will need to be made according to all the circumstances of the particular case.

Examples of relevant factors:

• What is the reason the person has come to the United Kingdom? If the person is here for recreational or temporary purposes (such as a holiday), this is likely to be a sign that they are not ordinarily resident;
• Does the person intend to leave the United Kingdom (other than for temporary absences of limited duration) in the next two or three years? If so, this may indicate that the person is not here for a settled purpose and is not ordinarily resident;
• Does the visit to the United Kingdom form part of a pattern of regular and significant visits over a number of years, or is such a pattern expected to emerge? If so, this may indicate that the person is ordinarily resident. The more frequent, and the longer, the visits, the more likely the person is to be ordinarily resident;
• Has the person’s family (spouse or partner and any children) also come to live in the United Kingdom? If so, this may indicate that the person (and his or her family) has a settled intention to remain in the United Kingdom, and is therefore ordinarily resident;
• Does the person have a settled home in the United Kingdom - for example, have they bought or leased accommodation? If so, this may indicate that the person is ordinarily resident. If not, this does not necessarily mean that the person is not ordinarily resident. Consider whether there are other reasons for this, such as lack of means;
• How long has the person lived in the United Kingdom? The longer they have lived in the United Kingdom, the stronger the indication that they are ordinarily resident. If a person has already lived here for three years or more, it should normally be accepted that they are ordinarily resident. (This does not mean that people who have lived here for less than three years are necessarily not ordinarily resident. A person can be ordinarily resident from the first day they arrive in the United Kingdom if they have genuinely come to make their home here.)

Ordinary residence: leaving the United Kingdom

When considering whether a person leaving the United Kingdom has ceased to be ordinarily resident here, the decision is whether they have, for the time being, ceased to live here as part of the regular order of their life. All the relevant factors should be considered in order to build up an overall picture of the person’s position.

Examples of factors, which may be relevant, are given below. These factors may help to indicate whether a person is ordinarily resident or not. Normally, no one factor on its own will determine that a person is, or is not, ordinarily resident. A decision will need to be made according to all the circumstances of the particular case.

Examples of relevant factors:

• Will the person be returning to the United Kingdom? If so, this may indicate that ordinary residence continues during the period(s) abroad (the sooner, more frequent or longer the return visits, the stronger that indication). If the person does not intend to return, this indicates that they have ceased to be ordinarily resident;
• What will the purpose of any return visits be? Visits to see family who have remained at the person’s home in the United Kingdom or holidays spent at such a retained home in the United Kingdom may indicate continued ordinary residence. Visits connected to the absence abroad (for example, being sent to the UK for training by an overseas employer) are less likely to indicate ordinary residence;
• Will the person’s family (spouse or partner and any children) be going abroad as well? If so, this may indicate that the person (and his or her family) are no longer ordinarily resident, particularly if they do not maintain a home in the United Kingdom. If the person’s family remains in the United Kingdom, however, this may indicate that the person continues to be ordinarily resident here;
• Will the person retain a home in the United Kingdom during their period abroad? If so, this may indicate continuing ordinary residence during the period of absence. If not, the person is less likely to remain ordinarily resident;
• If the person retains a home in the United Kingdom, will it be available for their use when they return? If so, this is an indication that ordinary residence may continue. If not - for example, because it is let on a long lease - then it is less likely that the person will remain ordinarily resident;
• Will the person be returning to the United Kingdom at the end of the period abroad? If so, this may indicate that ordinary residence continues. If not, this may indicate that the person ceases to be ordinarily resident, particularly if they do not retain a home in the United Kingdom during their absence;
• How long has the person lived in the United Kingdom. The longer the period, the stronger the indication that the person is ordinarily resident.

Ordinary residence: people deported to the UK

Tax Credits (Residence) Regulations 2003, Reg. 3(3)

To be ordinarily resident in the United Kingdom, a person must be here voluntarily. This may not apply to people who are here as a result of deportation, expulsion or some other legal form of compulsory removal from another country. To avoid any doubts about their eligibility for tax credits such people are, therefore, automatically treated as ordinarily resident for the purposes of both WTC and CTC.

The Tax Credits (Residence) Regulations 2003, Reg. 3(4)

WTC is available to people from countries in the European Economic Area who are exercising their rights as workers in the United Kingdom, or their right to reside here, under Community law. The worker is, even though they may not be ordinarily resident, to be treated as ordinarily resident for the purposes of WTC.

CTC is a family benefit under Community law, and is therefore subject to EC Regulation 1408/71 and 574/72. This means that in certain circumstances, these EC Regulations help the claimant (or claimants in the case of a couple claim) meet the presence and ordinarily resident requirement for CTC. [DN – once technical guidance agreed, link should be placed here to the technical manual dealing with international issues common to NICs, tax credits and ChB]

For new claims made on or after 1 May 2004 a claimant in the UK will need to have a 'right to reside' in the United Kingdom to be entitled to CTC.