UK: HMRC “Q&As” on statutory residence test and displaced employees (COVID-19)

UK: HMRC “Q&As” on statutory residence test

Travel restrictions because of the coronavirus (COVID-19) pandemic mean many employers are considering what impact unplanned days spent in the UK will have on their employees’ tax residence status.


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HM Revenue & Customs (HMRC) published guidance in “question and answer” (Q&A) format clarifying how the statutory residence test applies to individuals who have been unable to leave the UK because of COVID-19. Under the test, the number of days an individual spends in the UK during the tax year is considered in a number of detailed tests that determine UK tax residence status. For some of those tests, a day spent in the UK can be considered “exceptional” and therefore disregarded in counting days an individual has spent in the UK.

Exceptional circumstances

HMRC provided further examples of when days spent in the UK are likely to be considered “exceptional” for statutory residence test (SRT) purposes. These are when an individual:

  • Follows official advice not to leave the UK as a result of the virus
  • Is unable to leave the UK due to the closure of international borders
  • Is self-isolating in line with government advice
  • Is required to come to the UK to support a family member who has been asked to “shield” or “self isolate” (but the individual must demonstrate why it is necessary to come and remain in the UK to provide support)

For exceptional circumstances to apply, the individuals must be able to demonstrate the presence in the UK is beyond their control, they are prevented from leaving the UK, and they have made every effort to leave once the relevant restrictions have been lifted. The limit for “exceptional circumstances” remains at 60 days, and there will be no other relaxations, such as allowing individuals to treat UK work-days as non-taxable if they would ordinarily have been working overseas.

Full-time work overseas

Many individuals who leave the UK for work aim to be considered non-residents in the UK under the automatic “full-time working overseas” test. To meet this test, an individual must spend no more than 90 days in the UK during the tax year, of which no more than 30 days can be work-days. In addition, there can be no “significant break” from overseas work—that is, a period of more than 30 days without any overseas work-days.

Although “exceptional circumstances” (if they apply) can be used to extend the 90-day limit, HMRC confirmed that a day when an individual spends more than three hours working in the UK will still be considered a “UK work-day” even if that same day is considered exceptional for 90-day purposes. There will be no relaxation on this point. 

Similarly, HMRC confirmed that it will not relax the “significant break” test.

Other points

HMRC’s guidance also covers (1) the effect on the “family ties” test when an individual’s children are UK resident but not in full-time education due to COVID-19; (2) the impact (if any) on an individual’s domicile/deemed domicile position; (3) confirmation that the rules for UK residents claiming “overseas workdays relief” are unchanged, notwithstanding any duties normally undertaken overseas being carried out in the UK; and (4) that employment income articles in the UK’s double tax treaties remain unchanged, and their application depends on each individual’s circumstances.

Read an August 2020 report prepared by the KPMG member firm in the UK

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