HMRC’s extension to the Statutory Residence Test ‘exceptional circumstances’

25 March 2020

Guidance has been released by HMRC on what it considers to be ‘exceptional circumstances’ for the Statutory Residence Test (SRT) in light of the Covid-19 pandemic and in recognition that it may impact a person’s ability to move freely to and from the UK.

As Boris Johnson placed the UK on a three-week ‘lockdown’, and the Foreign Commonwealth Office (FCO) advised UK nationals who are travelling abroad to return home immediately if possible, HMRC’s earlier clarity over ‘exceptional circumstances’ is welcomed, but still leaves some questions.

Statutory Residence Test

Many expats and non-residents who spend time in the UK are aware of the SRT, which is based largely on days spent in the UK.  The legislation provides, through a series of tests, a definitive determination of an individual’s residence status in the UK.

The basic rule is that anyone who spends 183 days or more in the UK will be UK resident automatically for the entire tax year. The rules, in many cases, are more complex and dependent upon an individual’s circumstances and often on the number of sufficient ties with the UK.  The more ties a person has with the UK, the less days they can spend in the UK before becoming UK resident.

An individual will generally be treated as being present in the UK on any day where they are in the UK at the end of the day (i.e. at midnight). One of the exceptions to that rule is when a person has no choice over spending time in the UK and where the situation is beyond his/her control.

Each person is granted an additional 60 days in the UK throughout a tax year which will be disregarded for ‘exceptional circumstances’.  Those circumstances are normally very narrow and include the likes of natural disasters, war and a sudden serious or life-threatening illness or injury.  They do not normally include travel.

Extension to exceptional circumstances

HMRC has confirmed that, during the coronavirus outbreak, days spent in the UK can be disregarded due to the following exceptional circumstances:

  • If the 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
  • If the individual is advised by official Government advice not to travel from the UK as a result of the virus
  • If the individual is unable to leave the UK as a result of the closure of international borders
  • If the individual is asked by his/her employer to return to the UK temporarily as a result of the virus

The UK has not yet closed its borders and therefore HMRC guidance currently only applies if a person is unable to leave the UK as a result of other countries having already closed their borders.  However, the FCO’s advice is to avoid all non-essential travel and therefore all individuals following that advice must surely fall within the second category.   More clarity is needed on this point.

The fourth point only covers people returning to the UK if asked by their employers.  In these current times of uncertainty, expats may feel compelled to return to the UK, perhaps to look after family members.  As UK nationals have also been advised by the FCO to return to the UK, further guidance is needed in relation to nationals who may normally spend time in different countries, but would like to return to the UK for a temporary period.

HMRC are expected to issue further guidance, and this would be welcomed, particularly as the situation is exceptionally fluid.

Meanwhile, if you have any questions about your residence status, please do not hesitate contact me or your usual UHY contact.