HMRC notes ‘exceptional circumstances’ to help UK non-residents stuck in Britain

Reassurance from the government for UK non-residents obliged to stay longer than expected in the UK and worried about their tax status.

Following concerns last week that expatriates and UK non-residents who find themselves stranded in the UK as a result of the coronavirus shutdowns could end up with unexpected UK tax bills, HMRC has published guidelines on what counts as exceptional circumstances.

Unplanned UK stays could mean big tax bills for UK expats

The statutory residency test, which determines whether an individual will count as a UK resident and therefore be liable to UK income tax, stipulates that to be counted as non-resident, you must spend no more than 183 days in Britain.

However, it does offer some leeway for exceptional circumstances. Currently, up to 60 days may be ignored for tax purposes, with events such aslocal or national emergencies, such as civil unrest, natural disasters, the outbreak of war or a sudden serious or life-threatening illness or injury” potentially counting as exceptional.

The new release from HMRC explicitly recognises the impact of coronavirus and provides more details about what exceptional means in these circumstances. However, there is no mention at this stage of increasing the number of days that may be discounted.

HMRC says: “The coronavirus (Covid-19) pandemic may impact your ability to move freely to and from the UK or, require you to remain unexpectedly in the UK.

“Whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case.

“However, if you:

  • are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
  • find yourself advised by official government advice not to travel from the UK as a result of the virus
  • are unable to leave the UK as a result of the closure of international borders, or
  • are asked by your employer to return to the UK temporarily as a result of the virus

the circumstances are considered as exceptional.”

Richard Morley, partner in tax dispute resolution at BDO, welcomes the guidance as a sign that HMRC recognises many people may be in difficulties not of their own making.

“It is notoriously difficult to get HMRC to agree to exceptional circumstances, so HMRC’s recently published coronavirus guidance is as significant as it is welcome. We are living through a concerning and uncertain time, so it is pleasing that individuals who are being prevented from travelling are receiving this reassurance at such an early stage. This sweeping blanket approach is not something I have seen in the past, instead HMRC tend to consider potential exceptional circumstances on a case-by-case basis.

“This is a strong indication from HMRC that where they have the discretion, they are open to exercising it.”

However, he warns that HMRC will still be prepared to clamp down on anyone it identifies as abusing the rules. Individuals “would be best advised to only follow HMRC’s fresh guidance where they are sure they comply,” he adds.   

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