HMRC guidance on statutory residence test and COVID-19

HMRC has updated its guidance on the Statutory Residence Test (“SRT”) to extend the exceptional circumstances disregard to cover COVID-19. When calculating the number of days spent in the UK for SRT purposes, individuals may disregard any days spent in the UK as a result of:

• being quarantined or self-isolated following advice from a health professional or public health guidance;
• following official Government advice not to travel from the UK as a result of the virus;
• the closure of international borders; or
• being asked by their employer to return to the UK temporarily as a result of the virus.

The guidance applies the existing disregard for days as spent in the UK where:

• a person would not have been present in the UK at the end of the relevant days but for exceptional circumstances beyond the person's control that prevent them from leaving the UK, and
• the person intends to leave the UK as soon as those circumstances permit
  (the “Exceptional Circumstance Disregard”).

It should be noted that if a person actually falls ill with COVID-19, they will likely fall within the express example given in the legislation of “sudden or life threatening illness”.

Days spent in the UK

The SRT is a complex test. By way of a very brief reminder, a person will be UK resident for a tax year by virtue of days spent in the UK if:

• they spent 183 days in the UK in the year; or
• they spent fewer than 183 days in the UK but satisfy certain closely articulated conditions.

A day is counted as spent in the UK if the person is present in the UK at the end of it.

The effect of the Exceptional Circumstances Disregard is to discount from this calculation days spent involuntarily in the UK.

Limitations of exception

HMRC’s guidance is welcome as pandemics or epidemics are not expressly included in the examples of exceptional circumstances in the legislation. However, it is important to note that this is not a blanket exception and it is subject to the limitations of the Exceptional Circumstances Disregard.

In particular:

• The Exceptional Circumstances Disregard may be used for a maximum of 60 days. Once the number of days spent involuntarily in the UK reaches 60, any subsequent days will count as days spent in the UK.
• An individual who spends less than 183 days in the UK may still be UK resident if they work “sufficient hours” in the UK in a year. The calculation for “sufficient hours” is complex, but does not turn on the number of days spent in the UK. As such, the Exceptional Circumstances Disregard is inapplicable.
• Further, an individual who spends less than 183 days in the UK may still be UK resident if they have a home in the UK and spend “sufficient time” in that home (and insufficient time in their overseas home(s)). As this test is expressed in terms of being present in the UK home (rather than days spent in the UK home), the Exceptional Circumstances Disregard is inapplicable.

Practical considerations

Anyone intending to rely on the Exceptional Circumstances Disregard should obtain evidence of the reasons forcing them to stay in the UK and of their intention to leave the UK as soon as those reasons cease. Examples may include:

• doctors' notes advising the person to quarantine or self-isolate;
• communications from employers requesting them to return to the UK;
• airline tickets etc. evidencing an intention to leave the UK but for the exceptional circumstances.

HMRC also note that this is a rapidly changing situation and state that this guidance is subject to change at short notice.