UK Statutory Residence Test – an update


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In our last article, we explained HMRC's updated guidance on what falls within exceptional circumstances for the purposes of the Statutory Residence Test (SRT) in light of Covid-19 and which represents a welcome if limited clarification of its interpretation of the rules. Going further, on 9 April, the Chancellor, Rishi Sunak, wrote to the Treasury Committee stating that the SRT rules are to be relaxed further but only in their operation to key workers.

Highly skilled key workers

The Chancellor's letter clearly states that the SRT rules will only be changed for key workers involved in combatting Covid-19 in the UK. By this, the Chancellor aims to ensure that the most experienced individuals are not penalised for their presence in the UK to help the UK government in its fight against Covid-19.

Although the criteria are yet to be confirmed, the letter suggests that experts including anaesthetists through to engineers working on ventilator design and production will qualify.

When legislated, the change will have the effect of wiping out any days spent by those individuals in the UK between 1 March and 1 June 2020. Depending on developments, this period may be extended.

Reminder: HMRC's updated guidance for other taxpayers

Exceptional circumstances form part of the SRT rules and are designed to discount days spent in the UK for reasons beyond an individual's control. In practice, HMRC adopts a tight approach in determining whether a circumstance is exceptional.

However, circumstances are regarded exceptional if you are: 

  • quarantined or advised by a health professional or public health guidance to isolate in the UK due to Covid-19;
  • advised by official government advice to not travel from the UK due to Covid-19;
  • unable to leave the UK due to the closure of international borders; or
  • asked by your employer to return temporarily to the UK due to Covid-19.

The issue remains that disregarded days are capped at 60 days per tax year. Absent any legislative change to temporarily lift or increase the cap may affect the tax residency status of those stranded in the UK, potentially brining their worldwide earnings within the UK tax net.

We remain hopeful that HMRC will be sympathetic in its approach, but nevertheless advocate detailed record keeping to evidence an individual's inability to travel due to the pandemic.

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