We are living through exceptional days. Understandably, the spread of COVID-19 and the measures that have been implemented to delay its transmission mean that tax may not be at the forefront of people’s thinking.
However, there may be significant tax consequences for those individuals forced to remain in the UK due to measures outside of their control, where the additional time spent in the UK is enough for them to become UK tax resident under the Statutory Residency Test (“SRT”). Conversely, there may be taxpayers who intended to be UK resident for tax or visa requirements, who may find themselves non-tax residents in the UK.
Since 2013, the SRT has been the method of determining an individual’s residency status for UK tax purposes. There are a series of automatic residence and non-residence tests and a “sufficient ties” test where residency cannot be determined by the automatic tests. In short this considers the number of days an individual spends in the UK each year, along with any ‘ties’ or connections that they have to the UK, to determine whether or not they are UK tax resident for a specific tax year.
Individuals who are UK tax resident are potentially subject to UK tax on their worldwide income and gains unless they consider themselves to be domiciled outside of the UK and can elect to claim the remittance basis. Therefore, an individual who is inadvertently ‘stranded’ in the UK may find himself or herself with a significantly increased tax bill. In addition, foreign domiciliaries may find that the extra time in the UK means that they have under-estimated the amount of clean capital they needed and now may need to remit foreign income or gains to the UK.
Thankfully, days spent in the UK may be ignored in some of the tests if the individual’s presence in the UK is due to exceptional circumstances beyond their control. These are known as “Exceptional” Days. Ordinarily, exceptional days may include visits to the UK for family, health or business reasons. Up to 60 exceptional days can be claimed per tax year. However, note that exceptional days cannot be claimed for every test.
HM Revenue have been quick to offer additional guidance surrounding the COVID-19 outbreak and they have confirmed the following circumstances will be considered “exceptional” for the purposes of the SRT;
- quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus,
- advised by official Government advice not to travel from the UK as a result of the virus,
- unable to leave the UK as a result of the closure of international borders, or
- asked by your employer to return to the UK temporarily as a result of the virus.
However, it is worth noting that HM Revenue have confirmed that whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case, and as such the position for taxpayers is uncertain. A claim for exceptional days would be strengthened by the taxpayer leaving the UK as soon as they are reasonably able.
If you would like further information or advice regarding the tax implications of your residency position, or that of your clients, as a result of potential exceptional days spent in the UK, then please contact us.
Mark Davies, Director
Telephone: 0775 693 4867
Jon Elphick, Director
Telephone: 0781 320 6650
Alternatively contact us here and one of our specialist tax advisers will get back to you.