COVID-19: Impact on UK tax residency

COVID-19: Impact on UK tax residency for those stuck in the UK

Richard Bull, Partner, Private Clients
COVID-19: Impact on UK tax residency

For individuals managing their days in the UK to remain non-UK tax resident, the latest lock down measures may see them exceed the strict day count in the UK’s Statutory Residence Test meaning they may become UK tax resident.

The Issue

To contain the spread of COVID-19 most countries are imposing travel restrictions, a lot of these are currently advisory but more are becoming mandatory. Also, individuals in at risk groups or those displaying certain symptoms are being advised to self isolate; currently for 14 days for those displaying symptoms and up to 12 weeks for those who need to be shielded from the virus. These measures mean that many travel plans have been subject to change and people may struggle to leave the UK.

UK Statutory residence test

The UK Statutory Residence Test sets out how a person’s UK tax residence is determined. For individuals who do not satisfy one of the automatic overseas tests or automatic resident tests, residency is determined based on the number of ties that person has and the number of days they spend in the UK in the tax year.

Exceptional Days

A day of residence is constituted as presence in the UK at midnight on a particular day. However if the individual is in transit through the UK, provided that the individual does not engage in any work or social activity whilst in the UK this would be an exception.

Days in the UK resulting from exceptional circumstances beyond the individual’s control (such as illness) are also ignored subject to a maximum of 60 days.

HMRC has today updated their manuals to confirm that days spent in the UK due to the following reasons will be considered as exceptional.

  • Days spent quarantined or self-isolating in the UK as a result of the virus if advised by a health professional or public health guidance. 
  • If official Government advice is not to travel from the UK as a result of the virus.
  • If you are unable to leave the UK as a result of the closure of international borders.
  • If you are asked by your employer to return to the UK temporarily as a result of the virus.

Next Steps

The clarification from HMRC today is welcome as it gives certainty for people impacted who would otherwise go over their strict day count.

People managing their days in the UK should continue to keep track of their days while adhering to official guidance from the UK government.

Depending on how long the disruption lasts, it is possible that for some people the 60 exceptional day limit might prove to be insufficient. 

For those stuck in the UK longer than originally planned, expert advice should be sought to understand the impact that UK residency might have on their affairs in the current tax year (2019/20) and also the coming tax year (2020/21).

Trapped overseas

The majority of countries around the world also base tax residency on days spent there. 

For individuals stuck overseas, COVID-19 may mean that they inadvertently become dual tax resident. 

Crowe UK is a member of Crowe Global, the eighth largest accounting network in the world so we are able to work collaboratively with other members around the world to offer advice to people who find themselves in this position.

For more information, please contact your usual Crowe contact.

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Richard Bull
Richard Bull
Partner, Private Clients