HMRC have issued guidance for HMRC staff and taxpayers on how the Coronavirus (COVID-19) pandemic will affect the residency status of UK tax payers.
What is the Statutory Residence Test
The Statutory Residence Test was introduced by HMRC in April 2013 to determine the tax residence status of individuals with connections to the UK.
The Statutory Residence Test, while complex, is vital when it comes to understanding your UK tax residence status as being defined as a tax residence of the UK could mean that your worldwide income is subject to UK tax, and failure to correctly declare and pay tax on any income could lead to penalties and fines.
There are four essential components to the Statutory Residence Test:
1. How much time you have spent in the UK in a tax year
2. Automatic Overseas Test
3. Automatic UK Tests
4. Sufficient Ties Test
In the simplest terms, you will be considered a non-UK resident for tax purposes if you meet the automatic overseas test and you do not meet the automatic UK test or Sufficient Ties Test.
You will, however, be considered a UK resident if you do not meet the Automatic Overseas Test and you meet one of the Automatic UK Tests or the Sufficient Ties Test.
HMRC’s discretionary powers
HMRC always have had the power to waive the rules when exceptional circumstances would make you UK resident
HMRC guidance states that;
“Days spent in the UK may be ignored if the individual’s presence in the UK is due to exceptional circumstances beyond their control. This will usually only apply to events that occur while an individual is in the UK and which prevent them from leaving the UK.
Exceptional circumstances will normally apply where the individual has no choice concerning the time they spend in the UK, or in coming back to the UK. The situation must be beyond the individual’s control”
HMRC normally included serious ill-health and/or hospitalisation as exceptional circumstances However HMRC has hitherto maintained that the maximum number of days spent in the UK in any tax year that can be ignored due to exceptional circumstances is 60 in total, whether there is one event or several events in the same tax year. Days spent in the UK over the 60-day limit count as a day of presence for the purposes of the Statutory Residence Test.
HMRC’s new concessionary treatment for non-residents
HMRC now recognise that the coronavirus (COVID-19) pandemic may impact your ability to move freely to and from the UK or, require you to remain unexpectedly in the UK.
They maintain their current position that whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case.
However, if you:
• are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
• find yourself 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 your employer to return to the UK temporarily as a result of the virus
the circumstances will always be considered as exceptional.
It is also worth noting that as the United Kingdom has not closed its borders as yet, the guidance only accounts for the scenario that you are unable to leave the United Kingdom as a result of the closure of international borders. The guiding presumption is that the Foreign and Commonwealth Office’s advice against all non-essential travel comes within the parameters of the second circumstance listed and this may be updated in due course.
Should the UK close its borders, then HMRC may have to extend the 60 day limit on exceptional circumstances.
Events resulting from the impact of the virus are changing rapidly and HMRC guidance may change at short notice as situations change.
We regularly assist clients with their tax and residency planning both in terms of establishing tax residency in the UK or maintaining non-UK tax resident status. If you have been affected by the Outbreak and are unable to leave the UK, we can liaise with HMRC on your behalf in respect of claiming the exceptional circumstances relief.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at firstname.lastname@example.org or speak with an account manager to get any process started.
Here at SRC-Time, we will endeavour to keep you updated with all the latest information regarding financial aid at this testing time. Please note that the Government makes fresh announcements every day so please ensure that you have the latest information.