Is COVID affecting your travel plans? Don’t let it also affect your tax residence position

Following the outbreak of Coronavirus, some employees are finding that they are unable to travel to their place of work overseas, mainly due to company imposed travel restrictions to various affected countries. These companies are clearly acting in their employees’ best interests, and should rightly be applauded for this, but this could result in far reaching implications regarding tax residence for those same employees. 

This is particularly the case, as we approach the end of the current UK tax year, given many non-UK tax residents carefully manage their days spent in the UK to ensure they do not exceed allowable UK days, and so maintain their non-UK resident status. 

HMRC’s Statutory Residence Tests tend to be prescriptive, so it follows that UK days need to be monitored closely and can therefore be the deciding factor on whether an individual is classed as UK resident or not. Breaching the number of UK days allowed and subsequently being taxed as a UK resident would mean worldwide income becomes subject to UK tax, plus residence in one tax year, could potentially affect the tax position of years both before and after. 

HMRC agree that where presence in the UK is due to “Exceptional Circumstances”, i.e. beyond that individual’s control, then those days (up to a maximum of 60 days), can be ignored for the purpose of the statutory residence tests. This definition is construed strictly by HMRC and their guidance acknowledges this would include local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or sudden serious or life-threatening illness or injury. It also confirms Foreign and Commonwealth Office advice to avoid all but essential travel would count, but at the time of writing this article, the FCO hasn’t yet reached this heightened level.    

If an individual was to contract the virus, become hospitalised, or required to stay and self-isolate in the UK, we believe this would readily meet the definition of exceptional circumstances. however simply being asked to stay in the UK by your employer, does not currently preclude you from leaving the UK altogether. It is our opinion that HMRC would take the view that it is still possible to travel outside the UK to any other location, and as such, it is up to the individual to ensure they make alternative overseas travel arrangements to maintain their non-UK residence status within existing day limits. 

There has been no official statement issued by HMRC in terms of managing tax residence relative to the current COVID-19 impact, and advice to non UK residents travelling to the UK may well change, but for the moment, our recommended approach is to count any days in the UK towards annual day limits, unless you have actually contracted the virus and are required to remain in the UK for treatment, or be quarantined. 

HMRC’s approach to any claim for Exceptional Circumstances relief, would very much be dealt with on a case by case basis, and professional advice should be obtained. It is also worth noting that for days relating to ‘exceptional circumstances’ to be ignored from the UK day count, the individual must intend to leave the UK as soon as those circumstances permit them to. 

If you are affected by any of the above or would like any further information please do not hesitate to get in touch with us.

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For more information on our Private Client Tax team.