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Update on a tax case on exceptional circumstances

Jennifer McNally, Partner, Private Clients
13/06/2025
lady working on laptop
An individual’s status as resident or non-resident in the UK for tax purposes for a tax year is determined by the Statutory Residence Test (SRT). In counting days of presence in the UK for some (but not all) of the tests in the SRT there is a limited exemption whereby it is possible to ignore up to 60 days per year where presence in the UK is the result of ‘exceptional circumstances’.

In August 2022 we reported on a case heard before the First Tier Tax Tribunal (FTT) that considered the application of the law relating to exceptional circumstances Statutory Residence Test - A recent tax case on exceptional circumstances. The ruling of the FTT suggested interpretation of that law should perhaps be wider than HMRC would wish.

The FTT decision was overturned by the Upper Tier Tax Tribunal (UTT) in July 2023. The UTT ruled that the exceptional circumstances had to make it impossible for the taxpayer to leave, not merely difficult, and that serious illness was a commonplace circumstance which could not be converted into an exceptional one by a moral obligation.

The Court of Appeal (CA) has now overturned the UTT ruling and restored the original decision made by the FTT. Unless HMRC appeals the CA decision to the Supreme Court, we now therefore have some binding case law on the interpretation of exceptional circumstances. Based on this, in looking at an individual’s circumstances, we can conclude that the following qualifies.

  • Unsurprisingly, serious illness and death can be exceptional circumstances. 
  • Circumstances preventing the individual from leaving the UK can include a moral obligation as well as legal, physical or medical reasons.
  • In looking at whether a moral obligation prevents the individual from leaving, the individual’s own perception of whether they are required to remain in the UK is a factor, provided that perception is reasonably held.
  • The individual’s circumstances as a whole should be looked at to see whether they qualify as exceptional.
  • The circumstances do not need to be exceptional within the context of societal norms, merely exceptional within the individual’s own life.

Although the UTT ruling was overturned, it does offer us some helpful guidance for future reference.

It makes clear that the burden of proof falls on the taxpayer and is critical of the taxpayer in this case who, despite knowing that they would be arguing that exceptional circumstances would apply, kept no record of what they had done on each day or why they concluded at the end of each day that they were prevented from leaving the UK. It is clear, therefore, that detailed real time record keeping supporting a claim for exceptional circumstances is critical.

It also provides a helpful framework in terms of the records and supporting evidence required.

  1. Consider separately each of the days for which the taxpayer is claiming to have met the exceptional circumstances requirements.
  2. For each of those days
    • Establish the facts relating to each of the following:
      i. the circumstances were exceptional
      ii. the circumstances were beyond the taxpayer’s control
      iii. the taxpayer would not have been present in the UK at the end of that day but for those circumstances
      iv. the circumstances prevented the taxpayer from leaving the UK
      v. the taxpayer intended to leave the UK as soon as those circumstances permitted.
    • Establish the facts which show that the circumstances changed so as to allow the taxpayer to leave the UK at the end of the relevant day or days; this a will shed light on whether the taxpayer was previously prevented from leaving by the exceptional circumstances.
    • Consider which facts are objectively proven, whether by documents or credible oral evidence or by both.
    • In the light of those proven facts, decide whether each of the requirements has been satisfied.

If you have any questions about 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 Jennifer McNally, Mark Spalding or your usual Crowe contact.

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