Freedom of movement between countries has been heavily restricted in recent weeks due to COVID-19.
For some international individuals stuck in the UK, this may push them over a time threshold used to determine their residence for UK tax purposes and could mean they must pay more tax.
What is the Statutory Residence Test?
You may already be familiar with the concept of the Statutory Residence Test (SRT), which considers a number of factors to conclude whether or not you are resident in the UK in a particular tax year. The key factor is the number of days spent in the UK in that tax year. If the number of days is between 16 and 183 days, other factors such as the location of your main residence, your work and the ties you have to the UK must also be considered.
Unexpected days in the UK are likely to be unwelcome for international individuals for whom UK tax residence would mean a much higher UK tax bill.
If you’re forced to remain in the UK, what can you do?
The legislation allows you to claim that exceptional circumstances beyond your control have caused you to stay in the UK longer than you would have otherwise done. If you can demonstrate this, and that you intend to leave as soon as circumstances permit, you can claim that up to a maximum of 60 days per tax year should be disregarded for the purposes of the SRT.
Exceptional circumstances can include births, deaths, and sudden and life-threatening illness or injury to you, your spouse or dependent child. The legislation also refers to ‘national or local emergencies such as war, civil unrest or natural disasters’.
HMRC tends to set the bar quite high when considering whether a particular set of circumstances is exceptional. Key to this is whether the individual has any choice over how much time he is spending in the UK.
Is COVID-19 an exceptional circumstance?
Each case will of course turn on its own facts and circumstances but the latest HMRC guidance confirms that if you:
- are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
- find yourself advised by official Government advice not to travel from the UK as a result of the virus
- are unable to leave the UK as a result of the closure of international borders; or
- are asked by your employer to return to the UK temporarily as a result of the virus
the circumstances are considered as exceptional.
It remains to be seen how HMRC will apply this guidance in practice, and whether the 60 day limit will be sufficient for those affected by COVID-19.
The impact of the virus and the response to it are changing rapidly, and HMRC states that its guidance may change at short notice, so this is something which should be kept under review.
What should I do now?
From a practical point of view, keeping a record of the reasons you could not leave the UK together with any evidence as to these reasons, the dates on which they applied and a record of the formal Government / medical guidance at the time, will assist to alleviate any difficulties encountered long after the event.
You must fully intend to leave the UK as soon as you can and do so without delay as soon as the restrictions are lifted.
Care should be taken not to use your time in the UK in a way which may still affect your residency status, for example, by working more than three hours per day whilst forced to remain in the UK under exceptional circumstances. There may also be implications for the UK tax status of foreign companies, if COVID-19 is having an impact on the individual residency status of those on the company board.
If you require advice on your residency status, please get in touch with our International Private Client Team.
Melissa Barker (née de Carvalho)
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at June 2020.