United Kingdom – HMRC Publishes Guidance on COVID-19 and Statutory Residence Test
United Kingdom – HMRC Publishes Guidance on COVID-19 an
The U.K. tax authority, HMRC, has published guidance on when an individual’s presence in the U.K. by reason of the COVID-19 outbreak will be considered to be the result of ‘exceptional circumstances’. Many taxpayers and their employers are concerned about the impact that additional unplanned days spent in the U.K. may have on their U.K. tax residency status. HMRC’s additional guidance provides some welcome clarity in cases where individuals have needed to spend additional days in the U.K. due to COVID-19-related restrictions.
An individual’s U.K. tax residency status is determined using the Statutory Residence Test (SRT).1 Under the SRT, the number of days an individual spends in the U.K. during the U.K. tax year is taken into account in a number of the detailed rules that apply to determine their U.K. residency position.
In certain (but not all) cases, a day spent in the U.K. can be considered ‘exceptional’, and can therefore be disregarded, when counting the number of days an individual has spent in the U.K. for the purposes of the SRT.2
HMRC has published guidance on when an individual’s presence in the U.K. by reason of the COVID-19 outbreak will be considered to be the result of ‘exceptional circumstances’.3
WHY THIS MATTERS
Many taxpayers and their employers are concerned about the impact that additional unplanned days spent in the U.K. may have on their U.K. tax residency status.
HMRC’s additional guidance provides some welcome clarity in cases where individuals have needed to spend additional days in the U.K. due to COVID-19-related restrictions.
Exceptional Circumstances
Generally speaking if an individual is present in the U.K. at the end of a day, that day will be regarded as spent in the U.K. for the purposes of the SRT.
However, in certain (but not all) cases this does not apply if the individual:4
— would not ordinarily be present in the U.K. at the end of that day, but they are prevented from leaving due to ’exceptional circumstances beyond [their] control’; and
— intends to leave the U.K. as soon as those circumstances permit.
Up to 60 days can be disregarded as due to exceptional circumstances in any one U.K. tax year. It should be noted that exceptional circumstances only applies to certain of the rules to determine U.K. residence under the SRT. For example, if an individual works a number of days in the U.K. then, even in exceptional circumstances, these will still be counted as U.K. work-days for the purposes of the 30 day work-day limit which applies to non-U.K. residence by virtue of ‘working full-time abroad’.
HMRC Guidance Relating to COVID-19
HMRC has published guidance considering the travel restrictions and quarantine conditions imposed by many countries due to COVID-19. It has confirmed that an individual’s presence in the U.K. can be considered due to ‘exceptional circumstances’ in the following four scenarios:
— if the individual is quarantined or advised by a health professional to self-isolate in the U.K. as a result of the virus;
— if the individual finds himself in a ‘lockdown’ situation as a result of the virus;
— if the individual is unable to leave the U.K. due to the closure of international borders; or
— if the individual is asked by his employer to return to the U.K. temporarily as a result of the virus.
KPMG NOTE
This additional guidance will be welcomed by employees and employers who are concerned about the impact of having to spend additional days in the U.K. due to COVID-19 on an employee’s U.K. residency position.
However, even where there are exceptional circumstances care is required as the additional days can only be disregarded for certain of the rules under the SRT, and not others. The example referred to above of U.K. work-days spent by an individual claiming to be non-U.K. resident by virtue of ‘working full-time abroad’ is an illustration of this point.
FOOTNOTES
1 See full details of the Statutory Residence Test.
2 See HMRC’s previously published guidance on Exceptional Circumstances.
3 See HMRC’s new guidance on The Statutory Residence Test and Coronavirus.
4 Finance Act, 2013, Schedule 45, para 22.
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The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.
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