Strengthen Tax Residency Compliance: Introducing the Daysium Year

For globally mobile and high-net-worth individuals, managing tax residency is a juggling act. Traditional day-counting methods often include writing down travel days on calendars or spreadsheets, introducing many potential pitfalls. These manual methods, while straightforward, often fall short of tax residency compliance. There is an alternative way—something we like to call the Daysium Year.

Day-counting compliance doesn’t come out of the blue. Most globally mobile people know it’s essential. The real issue is with most methods for record-keeping and day counting.

Many opt for traditional manual methods, such as spreadsheets. Yet manually entering your days can be time-consuming and prone to errors. Presenting a spreadsheet of days with little corroborating evidence is unlikely to cut it during an investigation.

There are three core problems to manual, traditional day counting.

1. No Proper Process

As mentioned, most know that records need to be kept. But there aren’t well-established structures or rules around the process. People have all sorts of different systems they follow, leading to inconsistent records. You may remember to keep meticulous day counts at the start of the tax year. But then life happens, business takes you on long trips, and suddenly, those records look less than meticulous.

While you may be good at writing down your travel days, what about supporting evidence? Tax authorities may return and request you prove your travel beyond giving them a day count. Without a proper process in place, matching day counts with appropriate evidence can be burdensome.

2. Misinterpretation of the Rules

A lack of a structured process can also lead to misinterpretation. Tax laws around day counts can be complex. As the recent non-dom changes in the UK show, they’re also in constant flux. Learning the particular rules at the start of your more global lifestyle or change in residency doesn’t mean these rules will remain. Managing these complexities can take a backseat and add a lot of unnecessary stress to your life.

Even if you use a day counting tool to note your travel days, you don’t typically have anything to follow these complex rules. But the reality is that your tax residency situation and legal obligations can vary and change. You can’t rely on a cookie-cutter approach.

3. No Real-time Day Count

Manual day count systems also lack a real-time view of compliance. If you set aside a day every month to update your day count, you won’t be as quick to respond to life’s changes.

What if you want to travel to an unexpected business meeting or holiday? If your records lag, you may end up accidentally breaching the rules. If you’re extra careful and postpone travel, you may miss out on travel opportunities.

Day counting cannot be an afterthought. In the UK, HM Revenue & Customs (HMRC) opened almost 300,000 compliance investigations for the 2022/23 tax year. Globally, the OECD reported that cross-border information sharing involved around 123 million bank accounts in 2022.

A structured process for day counting can be your defence against accidental non-compliance. A method that aligns your strategic goals with your tax advisor’s advice.

Something we like to call the Daysium Year.

Here’s what it looks like:

Step 1: Establish the Rules

The process begins with a clear definition of the applicable rules. Daysium works with a network of tax specialists, creating a day counting system designed around unique needs right from the get-go. You set parameters that apply to you, getting the confidence to trust your day counts.

Step 2: Plan Your Travel around the Rules

Once you understand the allowable days per tax jurisdiction, you can start planning your trips. You have a clearer idea of when you’re getting closer to your limits. This reduces the risk of accidental overstays. You can view the day counts in the palm of your hand, taking the guesswork out of your tax residency.

Step 3: Log Your Day Count Automatically

The Daysium smartphone companion app automatically logs your travel days using your phone’s location data, eliminating the need for manual entry and the risk of miscalculations. With the Daysium Timeline, you can view a complete, accurate record of your day counts throughout the year. This data trail simplifies tax inquiries, reducing both the potential scope and duration of investigations.

Step 4: Add Supporting Evidence

During tax inquiries, day counts alone are often insufficient; corroborative evidence such as boarding passes, receipts, and particularly geo-tagged pictures are essential to support your travel narrative. Our research indicates that the quality of evidence is crucial, as a single receipt may not be convincing. With Daysium, you can match your location data and day counts with carefully curated evidence. You can show that you were at that location, not just your phone or credit card.

Step 5: Report

Finally, you want to create reports of your day counting data. These are not only helpful for you in understanding your residency compliance but can make strategic planning more manageable. With Daysium, you can rest assured that this reporting happens on your terms. Data is only ever shared on a need-to-know basis and as you choose to do it.

The Daysium Year is a powerful way to establish a process to protect you from non-compliance. However, tax investigations can happen to anyone. In 2022, the number of HMRC investigations that yielded no additional tax increased by 13% in the UK. Perfect compliance alone isn’t enough to prevent an enquiry.

The good news is that the Daysium method can reduce the scope and length of a tax enquiry. Let’s consider this by examining three case studies and our solutions to the three problems of traditional methods of tax residency compliance.

1. Creating a Precision Day Counting and Record-keeping System

As the above example of the Daysium Year shows, the strength of tax residency compliance lies in the robustness of the process around it. If you set a framework that makes day counting automated, frictionless and tailored to your needs, then you’re already on the right path.

Furthermore, the process needs to include an element of aligning day counting with record-keeping. As our previous look at a case study showed, some tax investigations are based on the quality of that data.

In one example UK court case, HMRC challenged a decision that deemed a taxpayer a non-resident of the UK after a First-tier Tribunal (FTT). In this case, the Appellant claimed non-UK residency based on exceptional circumstances that required them to stay in the UK beyond their allowed day count.

One element in the case was the lack of supporting documentation or insufficient records. With a clearly defined process for counting days and generating supporting evidence, it would have been easier to showcase why some travel days may be considered exceptional.

2. Automating Tax Residency Compliance

Many tax residency compliance cases require clear records of days spent in particular jurisdictions. In some instances, the data has looked back almost a decade, as one case study from Ireland shows. In this case, the Appellant had to demonstrate his non-tax residency in Ireland between 2002 and 2006, with the court case taking place almost a decade later.

By automating how you count your days, you can reduce the risk of errors and day-counting errors. You can also ensure that the rules under which you count your days are relevant and accurate. The ability to ensure you’re following the rules and have our companion app calculate the days for you reduce the guesswork around day counting.

3. Providing Real-time Access to Day Counting

In a recent case in the UK, the Appellant argued that they weren’t UK tax resident due to full-time work abroad. However, the Upper-tier Tribunal (UT) found that full-time work abroad wasn’t a definitive indicator of a break from UK residence, supporting an earlier decision by FTT.

For many, the problem is that they don’t have a day-counting process that considers their specific circumstances. Furthermore, the problem can be exaggerated due to the lack of a real-time view of travel days.

With the Daysium platform, you establish and set the parameters that apply to you. Once these rules are in place, you can effortlessly monitor them in the palm of your hand. Our Timeline shows your exact day counts in a specific jurisdiction, including any exceptional or ‘work’ days. This reduces the risk of overstaying, and you have the confidence to plan future travels.

“We recommend, therefore, that you let Daysium keep track of your day counts and alert you when thresholds are about to be breached.”
– Laurence Hodgens, Director, Hodgens Global, Dubai

The above case studies showcase that overturning court decisions on residency can be difficult, no matter the jurisdiction. These three cases also took years to conclude, often going from a lower tribunal to higher tiers.

With a proper day-counting process, accurate and tailored rules to follow, and a robust system to generate supporting evidence, the time spent on these investigations can be significantly reduced. This cost-saving practice can reduce the mental stress associated with tax enquiries.

Ready to take control of your tax residency compliance with confidence?

Join the Daysium platform today, and let us simplify your global tax management. Embrace peace of mind with every trip you take and every day you count.