Covid-19: New HMRC Guidance on the Application of the Statutory Residence Test

United Kingdom

Correct as of 11am 26 March 2020. This article is being maintained.

In light of the current Covid-19 pandemic, Her Majesty’s Revenue & Customs (“HMRC”) published new guidance on 23 March 2020 concerning the application of the Statutory Residence Test (the “SRT”).

What is the SRT?

The SRT, which was introduced by the Finance Act 2013 (“FA 2013”), applies in respect of tax year 2013/14 onwards.

The SRT employs different tests to determine whether an individual is UK tax resident, namely:

  1. the automatic UK tests;

  2. the automatic overseas tests; and

  3. the sufficient ties test (which apply if the automatic UK or overseas tests are not met).

Broadly, the number of days spent in the UK is a relevant factor in the application of all of the above tests under the SRT.

Covid-19 Exceptional Circumstances

Paragraph 22 of Schedule 45, FA 2013 provides that up to 60 days can be disregarded from an individual’s UK day count in exceptional circumstances when applying the SRT. “Exceptional circumstances” include, but are not limited to, “national or local emergencies such as war, civil unrest or natural disasters” and “sudden or life-threatening illness or injury”.

HMRC’s existing guidance provides that “(w)hether circumstances can be regarded as exceptional for the purpose of the SRT will always depend on the particular facts, an individual’s circumstances and choices available to them”.

HMRC has now published new guidance, which aims to clarify the application of the exceptional circumstances exemption in the context of Covid-19. HMRC recognises that the current pandemic may restrict the ability of individuals to move freely to and from the UK, which could result in individuals remaining “unexpectedly” in the UK.

Although not detracting from its existing guidance on this topic, HMRC have made clear that when an individual is:

  • quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus;

  • advised by official government advice not to travel from the UK as a result of the virus;
  • unable to leave the UK as a result of the closure of international borders; or

  • asked by his or her employer to return to the UK temporarily as a result of the virus,

these should constitute “exceptional circumstances”.