Is UK residency another symptom of COVID-19?
Thursday, 15 April 2021
In 2020/21 (the tax year just gone), a combination of national lockdowns, travel bans, and quarantine orders left a number of British citizens, expats and foreign nationals either forced into returning to the UK or unable to leave. In this blog, we will explore the silver linings and unavoidable realities of the global crisis and how this could have affected your tax residence position for that year.
Whilst there’s no rapid flow test for this symptom of the pandemic, examination of the rules in relation to exceptional circumstances is helpful when assessing whether or not you are resident here under the statutory residency test (SRT) as these allow you to exclude certain UK days from the total count in a tax year where your presence in the UK was beyond your control.
There must be no choice concerning time spent in the UK or returning to the UK. Prior to COVID-19, more likely scenarios might have been:
- Sudden serious or life-threatening illness or injury to you, your spouse, partner, or dependent child
- Civil unrest
- Natural disasters
- Outbreak of war
HMRC have, however, accepted that COVID-19 potentially adds to that list. However, the rules entitle an individual to ignore a maximum of 60 days only (non-consecutively, over any number of events) in a tax year, provided each meets the qualifying conditions.
So, what would be a COVID-19 related “exceptional circumstance”? The most common examples of qualifying incidents would be:
- You are quarantined or instructed by a health professional or UK-wide public health guidance to self-isolate in the UK.
- You, or perhaps your spouse, partner or dependent child, is seriously ill with COVID-19. This reflects pre Covid guidance relating to sudden serious or life-threatening illness. However, COVID-19 symptoms characteristically are unpredictable in their severity, so purely testing positive for COVID-19 may not constitute as an exceptional circumstance. A genuine justification for remaining or returning to the UK on this basis would be necessary.
- There is a national lockdown, and non-essential travel has been prohibited. If official government advice is not to travel as a result of the virus, this will be considered an exceptional circumstance. This also applies where the UK allows you to travel, but your usual country of residence still has its borders closed.
Remember, however, the maximum amount of exceptional days in a year, regardless of the pandemic, remains at 60 days.
What do I need to support my claim?
Things like doctor’s notes, prescriptions, written request from your employer to return/remain in the UK, flight cancellation details, attempts to rebook flights etc. Details of lockdowns and travel bans are publicly available for you to obtain as evidence.
Can these days be ignored for all aspects of the SRT?
Interestingly, no they can’t! Days spent in the UK due to exceptional circumstances still count if you work during them, when assessing significant breaks between employment, when considering days spent in your UK home for the purposes of the automatic UK residence test and when looking at the various “tie” tests. You cannot, therefore, assume you are out of the woods until you have considered your position thoroughly and have spoken to your advisor.
What happens if I become UK resident?
If it transpires you’ve become UK resident as a result of the pandemic, you will (broadly) be subject to UK tax on your worldwide income – which can include offshore earnings, investments, property, capital gains etc., wherever this may be situated.
Furthermore, if you have been non-resident for less than five years, and have now found yourself unexpectedly resident in the UK, you may fall foul of the temporary non-residents rules, which could mean you will need to pay tax on any UK capital gains disposals you made since you become non-resident that would have otherwise been outside the scope of UK tax; this would include assets such as UK shares, potentially even commercial UK property and land sold pre April 2019 etc.
It’s important you get in touch with an advisor if you think the temporary non-residents rules may apply to you.
UK residency and the SRT, with or without the Covid curveball, are notoriously complicated areas of taxation that can have an extraordinary effect on your overall tax position. If you feel unsure of your position, get in touch with a Larking Gowen advisor for assurance and guidance on the matter.