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The tale of Covid-19, the Statutory Residence Test and “Exceptional Circumstances”

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The Covid-19 pandemic has caused great uncertainty for many clients, including those who have found themselves stuck in a jurisdiction, unable to leave on the date they intended. It has triggered particular concern for non-UK resident individuals whose tax status may be impacted by a longer stay in the UK.

Travel in coronavirus

The statutory residence test (‘SRT’) introduced in 2013 sets out the rules for determining if an individual is resident in the UK for tax purposes. The test is predicated on the number of days on which the individual is present in the UK. More than 183 days, a person is automatically UK resident. Less than 16 days, a person is automatically non-resident. Within that range, the SRT takes other factors into consideration, including the numbers of ‘ties’ the individual has to the UK – the more ties, the less days the individual can spend in the UK before becoming tax resident.

So what does it mean for people who have been forced to spend longer in the UK due to the coronavirus crisis?

There is, fortunately, a specific carve out in the legislation for “exceptional circumstances” which include “national or local emergencies such as war, civil unrest or natural disasters” and “a sudden or life-threatening illness or injury”. If “exceptional circumstances” can be established, those days are disregarded from the overall day count (although limited to a maximum of 60 days per annum), provided the individual leaves the UK as soon as circumstances permit.

It was generally accepted that if an individual was hospitalised as a result of the virus, the “exceptional circumstances” rule would apply but there was less certainty as to whether travel restrictions in light of the crisis would be accepted by HMRC as exceptional.

Helpfully, HMRC published guidance which, in summary, indicated that if 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
•  is advised by official Government advice not to travel from the UK as a result of the virus
•  is unable to leave the UK as a result of the closure of international borders, or
•  is asked by his/her employer to return to the UK temporarily as a result of the virus

these would be treated as “exceptional circumstances”.

As always, however, every case is fact specific. For example, there may well be different treatment by HMRC for those who arrived in the UK before the pandemic struck and those who freely chose to travel after restrictions were put in place. Careful consideration of the rules should be taken before seeking to rely on this exemption.

For queries about statutory residence and tax planning, contact our Private Client Team on:

0330 404 8145     Email

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