UK non-residents forced to overstay may escape deemed tax residency

Monday, 23 March 2020
Non-UK resident individuals forced by coronavirus restrictions to stay in the UK for longer than the 60 days normally allowed will be regarded as being in 'exceptional circumstances' for the purposes of determining UK tax residency.

There has been concern that some people committed to managing their UK presence to avoid becoming UK tax-resident might have to unexpectedly spend extra days in the UK, incurring an unexpected tax bill. 'We have seen many enquiries from clients in recent days, concerned about how HMRC will interpret these exceptional circumstances', said law firm Withersworldwide.

HMRC has now acknowledged that the epidemic is affecting people's ability to move freely to and from the UK, or requiring them to remain unexpectedly. It has announced that it will 'look sympathetically' at any individual cases where the virus has caused issues or difficulties.

It has agreed to accept that any of the following circumstances are 'exceptional' and therefore may not automatically trigger UK tax residency:

  • the person is quarantined or advised by a health professional or public health guidance to self-isolate in the UK;
  • the person is officially advised by the government advice not to travel from the UK;
  • the person cannot leave the UK as a result of the closure of international borders; or
  • the person is asked by their employer to return to the UK temporarily, as a result of the virus.

However the 60-day annual limit set out in the 2013 statutory residence test is still in place and relevant, and HMRC warned it will consider the facts of each individual case before deciding to disregard days spent in the UK due to exceptional circumstances.

Some practitioners are concerned that the concession does not go far enough. 'There are still a number of concerns for [non-resident] individuals in the UK', commented Ceri Vokes, Partner at Withersworldwide. 'Our overriding concern at this stage is what if 60 days is not enough? HMRC should update its guidance if the crisis looks set to continue beyond 60 days into the new tax year and particularly if the UK goes into lock-down.'

'HMRC should go further to provide an unrestricted days extension in appropriate circumstances', said Simon Goldring TEP, Partner and Co-head of McDermott Will & Emery's London private client team in a press release. 'Although HMRC's brief guidance may be updated at a later date, for now it's important that anyone unexpectedly required to remain in the UK keeps track of the number of days they have been impacted by COVID-19, and takes that into consideration for both the current and upcoming tax year. Otherwise they may end up becoming UK resident.'

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