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The world is seeing unprecedented disruption as we try and cope with the outbreak of the latest coronavirus.

This disruption is causing some concern for our clients and others who are required to spend only a certain amount of time in the UK in order to maintain their non-resident tax status.

The UK has a Statutory Resident Test (“SRT”) which outlines the amount of time an individual can spend in the UK without becoming UK tax resident.  These rules are complicated but so prescribed that it is possible to avoid becoming UK tax resident if followed carefully.

However, it’s quite possible that travel restrictions and health concerns could mean that more time is spent in the UK, this additional time could potentially lead to more people becoming UK tax resident.

So what is the position in these exceptional circumstances?

The SRT does provide for exceptional circumstances which can allow certain amounts of time in the UK to be ignored.  The maximum number of days which can be ignored under exceptional circumstances is 60.

Here’s HMRC’s (the UK tax authority) definition of exceptional circumstances:

“Days spent in the UK may be ignored if the individual’s presence in the UK is due to exceptional circumstances beyond their control. This will usually only apply to events that occur while an individual is in the UK and which prevent them from leaving the UK.”

“Exceptional circumstances will normally apply where an individual has no choice concerning the time they spend in the UK or in coming back to the UK. The situation must be beyond the individual’s control.”

 Here’s what HMRC consider what an exceptional circumstance might be:

 “The type of events which may give rise to exceptional circumstances will be, by their nature, out of the ordinary and it is difficult to be prescriptive about what characteristics such an event would exhibit. However local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or a sudden serious or life threatening illness or injury to an individual are examples of circumstances that are likely to be exceptional.”

 Clearly all would agree the coronavirus COVID-19 outbreak will count as exceptional circumstances.

However we have concerns around the strict limits which apply when disregarding time in the UK due to these exceptional circumstances…

The 60 day limit – It’s looking like some of the restrictions that are being put in place could have an impact for far longer than 60 days.  As it stands only 60 of those days in the UK could be ignored.

Circumstances beyond their Control - The current rules are that the exceptional circumstances will only apply when the individual has no choice concerning the time they spend in the UK or in coming back to the UK i.e. it must be beyond their control.    

Clearly the coronavirus and its wider impact is beyond the individual’s control…

There’s a risk that some decisions will be made which are not beyond an individual’s choice i.e. there might not be a travel ban to a country, but you might choose to stay in the UK rather than travel in these uncertain times.  Would that decision count as an exceptional circumstance? Probably not if you consider HMRC’s guidance as currently drafted.

It is also worth noting that HMRC’s current guidance does not consider travel delays/cancellations as exceptional circumstances and that circumstances which could have been foreseen or predicted are not exceptional.  It’s possible to see that if taken literally this guidance could rule out certain amounts of time spent in the UK due to the coronavirus as not being exceptional.

Here is an example which would currently cause a problem when applying the exceptional circumstance rules:


Mark – Works Full-Time Overseas – UK Resident Family

Mark is living and working in Africa in the oil and gas industry, he works there full time and maintains non-resident status in the UK under the ‘full-time work overseas’ test, his wife and kids live in the UK.   This test broadly requires Mark to work full-time overseas (with no significant break from overseas work which exceeds 31 days), spend less than 90 nights in the UK and less than 30 workdays in the UK.  He manages this residency position carefully every year and is classed as a non-resident of the UK and has no UK tax liability.

Mark had already spent 55 nights in the UK in the tax year before he has to return to the UK as his wife falls ill and is hospitalised.  His wife makes a fall recovery after 55 days, but due to travel restrictions he spends a further 90 nights in the UK. 

Mark will have spent 145 nights in the UK in total in the tax year.

Mark’s return to the UK to care for his wife and family will be accepted as exceptional circumstances, so will the fact that he was unable to leave due to the travel restrictions in place. 

This means that Mark can ignore up to 60 nights in the UK (maximum permitted adjustment for exceptional days).

So if we ignore the exceptional days Mark has only spent 85 days in the UK and is still non-resident, or is he?

The current law is that the exceptional days test does not apply to the 31 day/significant break test for working full time overseas.

Therefore Mark has failed the test and is likely to have triggered UK tax residency as a result of these exceptional circumstances which have brought him to the UK.

As the law currently is written it is anticipated that that Mark might have additional UK tax liabilities on his employment income which would otherwise have been avoided.


Potential Solutions

It is possible that HMRC will introduce a temporary relaxation of the exceptional circumstances rules during these difficult times, a sensible solution would be to drop the 60 day limit at the very least.  In addition perhaps a specific coronavirus exception could be introduced which makes it clear that any disruption during a certain period will be looked at more leniently.   We are sure that this will happen and will lobby for this on behalf of any clients that are affected if it doesn’t.

In the absence of a relaxation on these rules it will be necessary to consider other tax planning to mitigate your tax liability.

If you are a dual resident and live in a country which has a Double Tax Agreement in place with the UK then you could claim that you are treaty resident outside of the UK, restricting the UK’s taxing right over your income. 

If there’s no Double Tax Agreement in place then it would be possible to claim a foreign tax credit in the UK to reduce your tax exposure.

If you require UK tax residency advice then please contact us to arrange an initial call to discuss your situation.