The UK t
ax authorities have taken steps to allay the fears of British expatriates stuck in the UK because of the coronavirus crisis and worried they might fall foul of tough tax-residence rules. HM Revenue & Customs has declared that people who face impairing their non-residence tax status through having to stay in the UK longer than planned could apply for special treatment under “exceptional circumstances” regulations. The decision was welcomed by tax advisers who said they could not recall HMRC ever before promising such a wide-ranging concession in advance of reviewing individual tax returns.
Advisers said that, while tax officials had previously accepted pleas for special treatment in the event of, for example, a volcano eruption or the 2014 Ebola crisis in Africa, they have not issued such a sweeping promise of flexibility. “The revenue has never done anything like this before,” said Simon Goldring, a partner at law firm McDermott Will and Emery. “I have never seen the revenue respond so fast to help people.” HMRC said in a guidance note on March 19 that the pandemic may affect people living abroad who want to move freely to and from the UK, and may require them to remain unexpectedly in the UK. It said it would treat as exceptional circumstances the cases of people quarantined in the UK or asked by a health professional or public health guidance to self-isolate in the UK; those advised by official government advice not to travel out of the UK; those unable to leave because of border closures; and those asked by an employer to return temporarily to the UK because of the virus.
The HMRC note said a final decision “will always depend on the facts and circumstances of each individual case”. Coronavirus business update How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter. Sign up here HMRC said the change was “not a blanket ruling and should be read in conjunction with existing guidance, and does not represent a change in the rules or requirements for determining tax residency.”
Under UK tax law, depending on personal ties to the UK, non-residents can spend 16 to 183 days in Britain before they have to start paying UK tax. Above 183 days they are considered UK residents. HMRC grants each non-resident an additional 60 days for exceptional circumstances such as births, deaths, sudden and life-threatening illness or injury. It said it was “keeping the situation under review” after tax advisers called for even more flexibility by relaxing the 60-day limit.
Mr Goldring said: “HMRC should go further to provide an unrestricted extension for Covid-19, in appropriate circumstances.” Some 5.5m British citizens live abroad, including professionals in the US and Hong Kong, pensioners in Spain and Portugal, and millionaires in tax havens such as Monaco. In the tax year ending April 2019, there were 223,000 non-resident taxpayers, said HMRC. More than 2,600 non-resident taxpayers claimed at least one day in the UK as being because of exceptional circumstances.
Nimesh Shah, a partner at accountancy firm Blick Rothenberg, said taxpayers seeking to benefit from the ruling should ensure all the paperwork was in order. Officials might probe a claim in 18-24 months’ time “when the present situation may be a distant memory and HMRC not as sympathetic or lenient.”
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