The effects on tax residence due to Coronavirus

Since coming into effect on 6 April 2013, the SRT has determined an individual’s residence position for a tax year. It is a complex test that looks at a series of factors, together in many cases with the number of days spent in the UK. Depending on circumstances and ties, the number of days can vary between 16 and 183 days, but everyone is UK resident if they spend 183 days or more in the UK in a particular tax year. 

Tax residence is important because it affects the degree to which an individual is taxed in any one country. UK residents are generally taxed on their worldwide income and gains, with possible exceptions for non-UK domiciled individuals. Non-UK residents are not taxed on their overseas income and gains, and have liabilities limited to some UK source income, and capital gains on UK properties and UK property rich companies. 

However, the new coronavirus situation is leaving some individuals who otherwise would not have been UK resident in danger of unintentionally exceeding day counts set by the SRT, and therefore potentially becoming UK resident unless special concessions are granted. 

HMRC has now released further guidance to extend the meaning of “exceptional circumstances”, which are days that are considered not to be a day of presence in the UK, which otherwise would count under the SRT. The number of such days is limited to 60 per tax year. 

HMRC are now indicating that the following would be considered “exceptional circumstances:” 

• Being quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
• Finding yourself advised by official government advice not to travel from the UK as a result of the virus
• Being unable to leave the UK as a result of the closure of international borders
• Being asked by your employer to return to the UK temporarily as a result of the virus. 

This should be welcome news for many people who are affected by this particular situation, although it remains to be seen whether HMRC will be lenient in their approach on a case-by-case basis. We will have to wait to see whether the limit of days will be extended from 60 if this crisis continues beyond that time. 

Either way, it is important if you would otherwise be considered not UK resident, but find yourself spending more time in the UK, that you seek professional advice to understand whether you are likely to be able to avail yourself of the exceptional circumstances provisions, and how this affects the number of days you can spend in the UK. Not every day count under the SRT can be reduced due to exceptional circumstances, so the position needs careful analysis.