The coronavirus crisis has turned all of our lives upside down. Some expats have been compelled to return to the UK as a result of the pandemic while others who were in the UK when lockdown hit have found themselves unable to leave. An enforced extension to their stay could trigger an unexpected – and unwelcome – tax liability.
How are HMRC dealing with these specific cases?
Non-residents stuck in the UK
Non-resident status is dependent on not breaching a maximum number of days that expats are permitted to spend in the UK. This could be anything from 16 to 183 days, depending on certain factors which apply according to the statutory residence test. For example:
Non-residents who were resident in the UK for one or more of the three tax years before the current tax year, who spend more than 16 days in the UK in the tax year could possibly be classed as resident for tax purposes.
Any non-residents who spend more than 183 days in the tax year in the UK ordinarily would be classed as resident for tax purposes.
It’s easy to see how an enforced, extended stay in the UK could trigger residency. In normal circumstances, if you are classed as a UK resident you would have to pay tax not just on UK income and capital gains but on all your assets worldwide.
It’s clear that this is a huge concern for non-residents who have become stuck in the UK on what was supposed to be a short trip. Under lockdown, they find themselves forced to exceed the maximum number of days they are allowed to spend in the UK to retain non-resident status as a result of coronavirus travel restrictions.
Fortunately there is good news for these individuals. Even in non-pandemic times, according to HMRC legislation, non-residents can be accorded an additional 60 days within a tax year for exceptional circumstances. Usually this would include births, deaths or unexpected illness or injury.
HMRC have in effect classed the Covid-19 crisis as exceptional circumstances and told expats and non-UK domiciled individuals who find themselves having to stay in the UK over their permitted number of days that they can claim these exemptions. This means that they will not have to pay tax on their global incomes.
The government website clarifies as follows the circumstances which are considered as exceptional:
- 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
- If you find yourself advised by official Government advice not to travel from the UK as a result of the virus
- If you are unable to leave the UK as a result of the closure of international borders, or
- If you are asked by your employer to return to the UK temporarily as a result of the virus
Nevertheless, this information is preceded by the caveat that whether or not exceptional circumstances will be applied always depends on the facts and circumstances of each individual case. I would therefore advise prudence for anyone finding themselves stranded in the UK – keep cancellation information regarding travel, any doctor’s notes if you have been officially quarantined and any other paperwork which could be relevant.
While this advice relates to those visiting the UK, it is worth noting that all countries have their own set of rules to determine tax resident status with the number of days spent in that country a common feature so it makes sense for anyone stranded anywhere other than their usual country of residence to find out about rules and regulations pertinent to their situation. For more advice, please contact me at email@example.com. And above all, stay safe everyone.
I started in the financial services industry back in 1995 and I am now the Country Director of Infinity Financial Solutions (Cambodia) Limited, specializing in corporate and individual medical and general insurance needs along with expatriate financial planning.