Pictured above: John Hodgson, managing partner of BTG Tax in Birmingham

Global business executives should benefit from a proposed new residency test, according to John Hodgson, managing partner at the Birmingham office of BTG Tax.

Mr Hodgson said he believed it would offer greater certainty in terms of structuring their tax affairs.

HM Revenue & Customs has issued a consultation document outlining how the new system might work. It is planned to have the test in place by April 2012.

Mr Hodgson said the present position had been left muddled by the "infamous" Gaines-Cooper case where the Court of Appeal ruled that multi-millionaire entrepreneur and Seychelles resident Robert Gaines-Cooper was liable to pay UK tax despite spending less than 91 days a year in England because the country had remained "the centre of gravity of his life and interests".

"The purpose of this development is to provide certainty to individuals as to their residency status, this issue having been made opaque by a series of tax cases including Gaines-Cooper, the concept still being to identify and bring into tax those individuals that are closely connected to the UK. The presumption is inbuilt that leavers will retain a closer connection than new arrivals," he said.

"However at present the rules are also a major deterrent to businesses investing in the UK and highly skilled employees on secondment working here. We are in a worldwide market place and mobility matters.

"Currently the proposals are just for consultation. However it is not anticipated that there will be any significant changes during the consultation period."

Despite a significant number of permutations related to family, accommodation, employment and time spent in the UK, Mr Hodgson said the outcome should be an improvement.

"Essentially there are 'black and white' tests at the extremes and then a points test for the vast majority in the grey area in the middle, with the goalposts being in a slightly different position depending on whether you are a new arrival or a leaver from the UK.

"It is particularly helpful that the 'factors' taken into account have been constrained to simply employment, accommodation and family connections. Wider issues such as location of financial assets, investment property portfolios, advisers' addresses, computer servers and extra-spouse relationships will no longer be a concern - for residence purposes at least!

"It ought to enable all but the most marginal of cases to be able to determine their status and allow taxpayers some certainty when filing their returns," he said.

Mr Hodgson said HMRC was planning to translate the rules into an on-line tool that by answering a few straightforward questions would churn out the answer to an individual's residence status - there is a test site at http://www.hm-treasury.gov.uk/consult_statutory_residence_test.htm.

But he cautioned that it could be 2015 before everything was sorted out.

"Peripatetic business people who just stay under the current 90 day average rule by working in the UK Monday to Thursday may be caught out as the new working day is defined as any day where more than three hours work was done, regardless of whether or not the person is still in the country at midnight.

"And the burden here is that the individual must prove they didn't work for three hours in any particular day. That's a tall order. It may therefore be that such travelling workers will need to re-adjust their arrangements."

For more information about BTG Tax, please visit their website here: www.btg-tax.com