Habitual residence’ is usually considered to be ‘the country where the centre of the person’s interests lie’ and where the individual ‘has the strongest personal connections.
What is ‘habitual residence’?
There is no formal definition of what is meant by ‘habitual residence’ although guidance has been obtained from various European Court of Justice (ECJ) cases. Although the cases date back to the 1970’s they contain useful guidance when looking at the meaning of ‘habitual residence’.
From these judgments ‘habitual residence’ was considered to be ‘the state where the centre of the worker’s interests lie’ and where the worker ‘has the strongest personal connections’. Such connections need not be numerous but must have a degree of permanency greater than any connections with other states.
This can affect taxation and social welfare payments.
See Citizens Advice – The habitual residency test – how a decision is made
What information does HMRC generally need to advise on ‘habitual residence’?
The following information will generally be needed to consider where a person is ‘habitually resident’ and where their ‘centre of interests’ lies:
- Where is the family home situated – if this is in the home state will it be rented while the worker is in another Member State or will it remain available for the workers use?
- Where do the worker’s wife/partner and family live – have they remained in the home state or will they accompany them?
- Where do the children go to school?
- What connections have been kept with the home state – are they still registered with a doctor – have they retained membership of any clubs, associations etc – are they still on an electoral roll?
- How often whilst working in another Member State will the worker return to the home state and how long will the visits last? Are the visits for business or pleasure?
- Where was the worker living before going to work in another Member State – what was the length and continuity of their residence in the home state?
- How long is the worker expected to remain in another Member State and is it their intention to return to the home state when the employment ends? If the worker does not intend to return to the home state where will they go?
- Where is the worker resident for income taxes?
How does HMRC decide where ‘habitual residence’ lies?
It is difficult to answer this question, because each case has to be considered on its own particular facts, but in general:
- if the worker retains accommodation in the home Member State and their family remain there whilst they are working temporarily in another state they will usually be considered as ‘habitually resident’ in the home State
- if no accommodation is retained in the home State or it is rented out and the worker’s family accompanies them to the other State they will not usually be considered ‘habitually resident’ in the home State
- the longer the worker is abroad, for example two years or more, the more likely it is that they will be considered ‘habitually resident’ in the other Member State
- if the worker has taken up stable employment in another Member State rather than short term employment it is more likely to point to ‘habitual residence’ there
- if the worker does not intend to return to the home State when the employment abroad ends this points to them no longer being considered ‘habitually resident’ in the home state
- if the worker makes frequent returns to the home State whilst working abroad, for pleasure as well as for business reasons this may point to ‘habitual residence’ there
- having a bank/building society account in the home state or still being registered with a doctor are not necessarily indicators pointing to habitual residence in the home state
For further information please visit HMRC – Ordinarily resident status
- HMRC – Meaning of ‘residence’ and how it affects your tax
- Gov.uk – Guidance on what is required to be considered ‘habitually resident’ in the UK
- Your Europe – Residence formalities
Page last checked: March 2016
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