The UK has been on effective lockdown since March 23 due to coronavirus, but what does that mean for residency? Andrew Diver, head of tax at Beatons, explains.
From that date, non-essential travel was not possible and international travel restrictions were in place to prevent the spread of Covid-19. However, these restrictions would have left some individuals unable to leave the UK and who now may be concerned about how the increased number of days they spend in the UK will impact upon their UK residence status.
An individual is resident in the UK for a tax year if they meet any one of three automatic tests set out in the UK Statutory Residence Test (SRT):
- Full time working in the UK
- More than 183 days in the UK
- Only house in the UK (and spend more than 30 days in year)
Even if these three criteria are not met, there are tie-breaker tests which will determine the number of days which can be spent in the UK before residence is deemed.
Individuals who do not wish to become a UK resident will normally calculate the number of days they can spend in the UK during the tax year (which will vary depending on the individual's specific circumstances) and ensure they do not exceed that limit. One of the ties tests is whether in the previous two tax years the individual has spent more than 90 days in the UK, so it is possible that individuals might have picked up an extra tie for the tie-breaker tests.
However, the statutory residence test provides that days spent in the UK under exceptional circumstances can be disregarded for the purposes of determining the number of days. This is subject to a maximum of 60 days in any tax year.
Exceptional circumstances is rather subjective and will be determined on a case by case basis but examples within the statutory residence guidance are “national or local emergencies such as war, civil unrest and national disasters or life threatening illness or injury”.
The last mass scale event HMRC allowed concession for was the volcanic eruptions in Iceland which made travel in that area impossible.
HMRC have produced some guidance on when coronavirus associated matters will be deemed exceptional circumstances for counting days. This is for all purposes; the 90 day tie as well as total days in the UK.
HMRC has published new guidance on the circumstances in which days spent in the UK as a result of Covid-19 can be considered exceptional, and therefore disregarded. These circumstances include where an individual:
- Is quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
- finds themselves advised by official Government advice not to travel from the UK as a result of the virus.
- is unable to leave the UK as a result of the closure of international borders
- is asked by their employer to return to the UK temporarily as a result of the virus
The guidance does not however state whether the 60-day limit on exceptional circumstances will be extended. It would seem reasonable due to the number of restrictions on international travel, not just from the UK guidance but also restrictions from the other jurisdiction, that the 60-day limit could easily be breached merely following this guidance.
Care should still be taken when working in the UK. While a day might have been disregarded for many purposes due to coronavirus, there is no exceptional circumstances which state that you can work in the UK if you are not able to work overseas due to exceptional circumstances. If you are working in the UK for more than three hours in excess of 40 days in a tax year, it will add a further tie for the significant ties tests.
As a further extension to encourage the necessary worldwide talent to deal with the Covid-19 challenges, HMRC has also agreed to ignore days in the UK carrying out work to combat Covid-19 for the purposes of determining residence.
HMRC guidance is available here: https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm11005
If you require further advice, please get in touch by calling 01473 659777.