- The Statutory Residence Test was introduced by HM Revenue and Customs back in 2013 to unearth the residence status of the individuals living in the UK.
- HMRC have issued latest guidelines on exceptional circumstances for the Statutory Residence Test in context of the novel Coronavirus.
- All in all, the tax residency status will depend on the total number of days you have spent in the UK, your connections within the country, and the previous status of your tax residency.
The Covid-19 pandemic is impacting everyone’s life in one way or the other. Whether it’s personally, psychologically, or professionally, the current crisis is definitely one of the most challenging times for each one of us. With all the restrictions and travel bans in place, tax is definitely not everyone’s top preference these days. However, some foreign nationals attentively plan the total number of days they spend in the country in each tax year to avoid getting the title of the UK tax resident.
And, as we’re heading towards the end of the current tax year, people are worried about the impact their enforced extended stay will have on their current residence status.
The Statutory Residence Status Defined
The Statutory Residence Test was introduced by HM Revenue and Customs back in 2013 to unearth the residence status of the individuals living in the UK. Simply put, the Statutory Residence Test revolves around four key areas:
- The total amount of time you have spent in the country in one tax year
- Automatic Overseas Test
- Automatic UK Tests
- Sufficient Ties Test
Noticeably, your residence status will be considered as a ‘non-UK resident’ if you successfully fulfill the Automatic Overseas Test and do not fulfill the requirements for the Automatic UK Tests/Sufficient Ties Test.
Coronavirus and the Statutory Residence Test
HMRC have issued latest guidelines on exceptional circumstances for the Statutory Residence Test in context of the novel Coronavirus.
Against the backdrop of the current Covid-19 crisis, HMRC have mentioned four exceptional circumstances for the purpose of the Statutory Residence Test.
- If you’re isolated or self-quarantine or have been advised by you healthcare provider or PHE to follow self-isolation guidelines to reduce the spread of the virus
- If you’ve been advised by authorities not to travel from the country to prevent the spread of the deadly disease
- If you’re not able to carry forward your travel plans due to border closures and ongoing travel restrictions
- If you’re asked by your employer to return back to your country taking into account the ongoing employment and business situation in the UK
Although HMRC’s recent guideline is pretty clear, there are many situations that do not really fall into the above-listed criteria. For example, if you have been quarantined for two weeks and are allowed to leave, but what if any of your close relatives becomes seriously ill and needs to be hospitalized in the UK?
Similarly, what if you could leave in practice because the borders are open but there’s no travel arrangement or scheduled flights to go to another country? In that particular case, you won’t be able to leave the country and have no choice but to stay. Again, this particular situation is not being covered in the revised HMRC guidelines.
If the current situation continues to impact the next tax year, there is absolutely no guidance on whether the 60-day limit is going to be abjured.
There is no denying the fact that these highlighted issues aren’t ones that are currently at the back of our minds, but people will eventually have to confront these situations.
Besides these obvious situations, there are many other circumstances in which the extended stay in the country because of an ongoing crisis could impact your current residence status.
All in all, the tax residency status will depend on the total number of days you have spent in the UK, your connections within the country, and the previous status of your tax residency. While residence status is generally determined for a complete tax year, if your individual circumstances require split year treatment the tax year will be divided into resident and non-resident period.
Since these rules are quite complex, it’s highly suggested that you must seek your lawyer’s advice to know more about the current implications.
If you’re living in the UK for more than 183 days, you’ll then be considered as a UK resident. Currently, the total number of days that can be disregarded under this exception is confined to 60 days. But, it’s important to understand that this rule is only applicable where a person is helpless and has no other choice. But yes, whether you’re in self-isolation or cancelled your travel plan due to border closures or other restrictions, the Covid-19 pandemic is definitely an uncharted territory for all UK nationals and can be regarded as an exceptional situation.
Tips to Consider…
Whether you were planning to apply for your British Citizenship or looking forward to receiving your EEA Registration Certificate, you have to wait until the current situation gets better and the pandemic is over.
Also, it’s extremely important that you remain careful and attentive during this period. For instance, if you keep on working at least 3 hours per day for 40 days, this will be regarded as a tie in the UK.
In this case, there will be a significant reduction in the total number of days you can spend in the country if you have an extra tie. Similarly, if you accept work which is considered as just incidental of your responsibilities, you may have to pay a tax on a certain segment of your earnings.
We would suggest that affected people should keep track of their records including airline or hotel tickets, healthcare appointments, and current Government notifications relevant to their position.
HMRC, on the other hand, should also consider issuing comprehensive guidelines on the subject matter of the Statutory Residence Test so that the affected individuals could plan something better and relevant.