Coronavirus – will this impact your tax residency status?

Wendy McKay

Wendy McKay

Tax Manager

As we approach the end of the current UK tax year and the Coronavirus continues to spread throughout the UK and globally, there will undoubtedly be significant tax implications for individuals aiming to maintain their non-UK residence status.

The restrictions on work and travel may have tax impact on those who might typically be not UK resident but now find themselves in lock down or unable to work for the time being.

The Statutory Residence Test (SRT) provides a set of rules on whether an individual is resident in the UK, and one of the key factors is the number of days spent in the UK during each tax year. That being the case, non-residents must carefully manage their days spent in the UK. Exceeding the number of permitted days in the UK (by reference to each individual’s circumstances) could mean that non-UK residence status is lost and worldwide income and gains then being subject to UK tax.

HM Revenue & Customs (HMRC) acknowledge that if days spent in the UK are due to “exceptional circumstances”, these days (up to a maximum of 60 days) can be ignored for the purposes of some elements of the SRT. This guidance has very recently been updated to recognise that the COVID-19 pandemic will inevitably affect these individuals and HMRC have advised the following:

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,
  • find themselves advised by official Government advice not to travel from the UK as a result of the virus,
  • are unable to leave the UK as a result of the closure of international borders, or
  • are asked by their employer to return to the UK temporarily as a result of the virus,

then these circumstances will be considered as exceptional.

HMRC have indicated that that there is no intention to increase the 60 day limit at the moment, but this does provide some welcome reassurance in a very difficult time. 

What the updated guidance does not address is that exceptional circumstances relaxation does not apply for all aspects of the SRT. Working while in the UK, having a break from overseas work, or being away from your home outside of the UK can also have an impact on non-UK residence status under the SRT. 

It is important that where your UK tax residence status could be affected by these issues you consider your position for the current year 2019/20 and also the new tax year starting on 6 April.

If you are affected by the above or would like further information, please do not hesitate to contact Wendy McKay or Jane McBain or your usual Johnston Carmichael contact.