For those seeking to remain not-UK resident for the year by managing their days in the UK, additional time spent in the UK can have unintended and potentially costly consequences (see our previous update on COVID-19 and UK residence).
Fortunately, there is a limited exemption whereby it is possible to ignore up to 60 days per year in counting days of presence in the UK for some (but not all) of the tests in the Statutory Residence Test (SRT) where that presence in the UK is the result of 'exceptional circumstances'.
In order for the exemption to apply for a day:
HMRC’s guidance provides examples of exceptional circumstances which include sudden life-threatening illness or injury to the individual or a spouse, partner or dependent child, and local or national emergencies such as civil unrest, natural disaster or the outbreak of war.
Early in the pandemic HMRC published further COVID-specific guidance confirming that exceptional circumstances would also apply to the following:
A recent case before the First Tier Tax Tribunal considered the application of the law relating to exceptional circumstances. The tax year under examination pre-dated COVID-19, but the case provides some useful pointers as to the interpretation of that law, and in one instance the Tribunal’s ruling directly contradicts HMRC’s published guidance.
In putting their case, HMRC advanced the following arguments, all of which were rejected by the Tribunal.
The Tribunal’s rulings on these points suggest that interpretation of the legislation on exceptional circumstances is perhaps wider than HMRC would necessarily wish. However, as the case was heard by the First Tier Tribunal it is not legally binding. Only if an appeal to the Upper Tier Tribunal or beyond also found against HMRC would this case set a binding legal precedent. In the meantime (as often when a case is decided against them) HMRC is likely to argue that the case was decided on its own specific facts and is not therefore of general application.
There is one final point to take away from the case - the Tribunal criticised some of the claimant’s evidence as being 'vague in relation to details'. Therefore, we would advise our clients to keep detailed and preferably contemporaneous records in support of any claim for exceptional circumstances.
If you have any questions about any matters to do with UK tax residence or if you require any assistance in considering a claim for relief for exceptional circumstances, get in touch with Mark Spalding, Lisa Mead or your usual Crowe contact.