Effect of COVID 19 on individual and corporate UK residence

A person is tax resident in the UK if they spend a certain number of days in the country during a tax year (6 April–5 April). The number is determined by the statutory residence test (SRT), described in RDR3 (https://www.gov.uk/…/publ…/rdr3-statutory-residence-test-srt).

For many individuals who want to spend as much time in the UK as possible, it is a carefully balanced act to avoid becoming UK resident. Those who unexpectedly became stuck in the UK because of the quarantine are looking to become UK resident against their will.

The SRT allows a person to spend longer time in the UK without increasing the number of days used to determine their residence under the “exceptional circumstances” (https://www.gov.uk/…/residence-domicile-and-remit…/rdrm13200). Broadly, one can spend up to 60 days without risking their residence status. However, to prevent abuse, the exceptional circumstances are described very narrowly.

Recent guidance suggests that if a person is forced to stay in the UK due to the quarantine, it can be considered as exceptional circumstances. More particularly:

“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:

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

the circumstances are considered as exceptional.”

Kessler QC (TFD 2020/21) believes that para [3] covers most people in the UK, since travel has been prohibited, in the absence of a reasonable excuse. What constitutes a reasonable excuse will largely depend on government guidance, which will vary over time. At present, travel is permitted only for limited reasons, eg for work which cannot be done from home (http://www.legislation.gov.uk/uk…/2020/350/regulation/6/made) Leaving the UK for other reasons is likely to be unlawful.

This should give hope to those unable to fly back to their home countries. However, it remains to be seen, how the exceptional circumstances will be claimed in self-assessment tax returns.

For companies, HMRC say that:

“We do not consider that a company will necessarily become resident in the UK because a few board meetings are held here, or because some decisions are taken in the UK over a short period of time. HMRC guidance makes it clear that we will take a holistic view of the facts and circumstances of each case.”