Druces IWF – International Wealth and Fiduciary

How do you become tax resident in the UK?

Residence is a concept concerned with a person’s physical presence in the UK. The rules for determining a person’s UK residence are governed by the Statutory Test for Residence, which are briefly set out in our article here.

Once an individual is considered resident in the UK, they are taxable for income tax and capital gains tax purposes on their worldwide income and gains save for the use of the remittance basis of taxation if they are non-UK domiciled.

We often advise clients to carefully manage their days and normally recommend that they plan to spend a few days below the figure that would make them UK resident to counter for any unforeseen circumstances that may arise.

Are there any exceptions if unforeseen circumstances arise?

The maximum number of days spent in the UK in any tax year that may be ignored due to exceptional circumstances is 60. This is a limit, not an allowance or entitlement.

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.

Prior to the coronavirus outbreak, HMRC’s guidance considered the following as beyond an individual’s control:

“local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or a sudden serious or life-threatening illness or injury to an individual”

Life events such as birth, marriage, divorce and death, are not routinely regarded as exceptional circumstances.

Choosing to come to the UK for medical treatment, or to receive elective medical services such as dentistry, cosmetic surgery or therapies are not regarded as exceptional circumstances.

What is HMRC’s attitude on staying in the UK due to the coronavirus?

HMRC has already released guidance on what it considers to be exceptional circumstances for the Statutory Residence Test in the context of coronavirus:

  • If you are quarantined or advised by a health professional or public health guidance to self-isolate in the United Kingdom as a result of the virus;
  • Find yourself advised by official Government advice not to travel from the United Kingdom as a result of the virus;
  • Are unable to leave the United Kingdom as a result of the closure of international borders, or;
  • Are asked by your employer to return to the United Kingdom temporarily as a result of the virus.

The UK is yet to close its international borders although the guidance from the Foreign and Commonwealth Office is advising everyone against all non-essential travel which some would argue comes under the umbrella of the second bullet point above.

HMRC’s updated guidance has also suggested that a final decision “will always depend on the facts and circumstances of each individual case”.

Is 60 days enough?

The tax year in the UK runs from 6 April each year to the following 5 April. An individual is considered to have spent a day in the UK if they are in the UK after midnight.

As the UK did not go into full lock-down until 23 March, the 60-day time limit for exceptional circumstances owing to the coronavirus (provided an individual qualifies) is unlikely to materially impact upon anyone’s tax residence position in the tax year ending 5 April 2020.

However, as the tax year begins this week and with several individuals likely to be stranded in the UK, it is a concern that the 60 days may simply not be enough for the forthcoming tax year as unfortunately this crisis looks set to continue at least over the next few months.

HMRC should urgently consider updating their guidance given these unprecedented circumstances to extend the exceptional circumstances exemption beyond the 60-day limit to prevent individuals becoming inadvertently UK tax resident.

We will continue to monitor HMRC’s guidance on this issue and given that a final decision will “depend on the facts and circumstances of each individual case” it is imperative that clients keep accurate records of their days in the UK and their reasons for being in the UK at any given time.

Further information

We hope that this guidance is useful. If you do have further questions or require advice on this topic, please contact Paul Levy or Robert Macro from our international wealth and fiduciary team.

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