23 March 2020

With the rapidly evolving situation in relation to Coronavirus (COVID-19), we have been contacted by clients seeking advice in relation to their UK residence position and their immigration status. 

Increasing numbers of people are self-isolating and extensive worldwide travel restrictions are in place. Some individuals who had made plans to be either in the UK or outside of the UK for a certain number of days in the current tax or calendar year are finding those plans ever more disrupted.

With advice and policy constantly developing, it is important to remain up to date with any changes to government advice and consider the related legal issues that may arise. HMRC has published some limited additional guidance in relation to the 'exceptional circumstances' rule under the statutory residence test but the professional bodies are pushing HMRC to give more detail on this. In this briefing we also consider some queries which may arise in relation to immigration status.

What is the Statutory Residence Test?

By way of recap, the statutory residence test (SRT) determines whether an individual is resident in the UK for tax purposes in any given tax year. The SRT comprises a series of three tests.

  1. The Automatic Overseas Tests;
  2. The Automatic Residence Tests; and
  3. The Sufficient Ties Tests.

The three tests are used to confirm whether an individual is either resident or non-resident in the UK for the entirety of a particular tax year (6 April to 5 April of the following year). Counting the number of days during which an individual is present in the UK is a key component of all three tests. In many cases, day counting, combined with other factors, will determine whether an individual is resident in the UK. 

Those seeking to ensure that they are not UK tax resident in the current tax year, may well have carefully planned the number of days that they will spend in the UK. Illness, self-isolation and travel restrictions might disrupt those well-laid plans and being so close to the end of the tax year means that there is little room for manoeuvre.

What are 'Exceptional Circumstances'?

For those affected by illness, self-isolation or travel restrictions, some relief may be available in the form of the 'exceptional circumstances' rule contained in the SRT. This rule provides that days spent in the UK, which are beyond an individual's control due to 'exceptional circumstance', may be ignored in calculating the total number of days that an individual may be present in the UK before becoming UK tax resident.  

The maximum number of days that may count as exceptional circumstances in any tax year is 60 days per taxpayer. The legislation provides limited examples of what may constitute exceptional, but does refer to 'national or local emergencies such as war, civil unrest or natural disasters' and 'sudden or life-threatening illness or injury'.

HMRC expands upon this in its guidance, providing that where an individual needs to remain in the UK to deal with a sudden or life threatening illness or injury to a spouse, person who they are living with as husband and wife, civil partner or dependent child, then this may be an exceptional circumstance. 

In addition, HMRC has just published updated guidance, specifically relating to Coronavirus (COVID-19). The guidance provides that '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
  • find yourself advised by official Government advice not to travel from the UK as a result of the virus
  • are unable to leave the UK as a result of the closure of international borders, or
  • are asked by your employer to return to the UK temporarily as a result of the virus the circumstances are considered as exceptional.'

Whilst this additional guidance is welcome and will assist some individuals, it still leaves many question marks and does not address numerous scenarios that may arise. It is hoped that further, more detailed, guidance will be issued in due course.

Circumstances which may not fall into the current guidance include:

(a) Where an individual cannot return to a particular country, due to border closures, but they could leave the UK and go to another country (albeit not one that they necessarily want to go to);

(b) Where an individual cannot fly directly to the country they wish to return to, but could return indirectly, via other countries/routes;

(c) Where an individual cannot continue with their current travel plans and alternatives are available but the costs are prohibitively high; and

(d) Where an individual has to stay in the UK for more than the current 60-day limit that applies to exceptional circumstances.

It is also important to realise that the 'exceptional circumstances' test only applies in relation to counting the total number of days you spend in the UK. Other parts of the SRT may also be affected.  HMRC has been asked for further guidance on, for instance, the following:

(a) Work-days. Where an individual is forced to work somewhere they would not normally have to work, will these days count as work days for the purposes of the automatic UK or automatic overseas tests? Will they count as work days for the purposes of the 'work-tie'?

(b) Country-tie. A person has an extra tie for the SRT where they spend more days in the UK than in any other single country. The position here is also unclear.

Related questions also arise for other taxes. For instance whether a company might become UK centrally managed and controlled in the UK if the directors of that company are stuck in the UK and have to take decisions while here. Will that cause the company to be drawn into the UK corporation tax net?

We will provide a further update once additional guidance has been provided by HMRC. At present HMRC has indicated that they will be 'sympathetic' to other situations, but sympathy only goes so far and the extent of it isn’t yet clear.

Practical advice in relation to the SRT

Until the release of further guidance in relation to the SRT, we advise that individuals keep detailed and accurate records of days spent in the UK and outside of the UK, accommodation arrangements, proposed travel arrangements, proof of cancellations and any days of sickness and self-isolation. Our experience is that it is much harder to recall this information retrospectively.  

Immigration Concerns

Day counting plays an important role in defining an individual's residence, not just for tax (i.e. under the SRT) but also for immigration purposes.

When applying the SRT, an individual is (generally) treated as having spent a day in the UK if they were present in the UK at midnight at the end of that particular day. In contrast, for immigration purposes, which usually include a residence requirement, a part day of absence (i.e. less than 24 hours) will not count as absence from the UK. 

Update: Since the publication of this article on 23 March, the Home Office has published further guidance in relation to those whose visas may be affected by travel restrictions as a result of Covid-19. Our summary of the new immigration guidance can be found here.

Short-term measures

The Home Office first issued guidance on immigration provisions for individuals affected by the travel restrictions on 17 February 2020. There has not been a substantive update since 25 February 2020. The guidance confirms the following key points:

  1. Chinese nationals in the UK (who have been compliant with their visa requirements) will have their visa automatically extended to 31 March 2020 if the visa expiry date is between 24 January 2020 and 30 March 2020.
  2. All UK Visa Application Centres in China are closed until further notice.
  3. A Coronavirus immigration helpline is now available (by telephone and by email).
  4. Students or employees under the Tier 2, Tier 4 or Tier 5 categories may be prevented from attending their studies or employment due to Coronavirus:
  5. (a) Sponsors do not need to report absences related to Coronavirus which they have authorised; 

    (b) Sponsors do not have to withdraw their sponsorship if they consider that the absences are due to exceptional circumstances.         

Long-term issues

The situation has escalated rapidly and further travel restrictions are now in place since the release of this guidance on 17 February 2020. Burges Salmon is expecting updates to be released shortly to cover the further travel restrictions and to clarify how absences will be treated for settled status, Indefinite Leave to Remain and naturalisation applications.

Until the Home Office provides further clarifications on the treatment of absences caused by Coronavirus, we advise individuals who are affected to make contemporaneous records as follows:

  1. Days of absence from the UK;
  2. Reasons for absences from the UK;
  3. Any relevant travel restrictions; and
  4. Cancellations for planned travel (e.g. correspondence with airlines regarding cancelled flights).

The circumstances and residence requirements are different for each individual. Therefore, it is important to keep a record of absences in order to plan the next steps as the situation evolves. As mentioned above in relation to the SRT, it is always easier to keep a contemporaneous note rather than having to look back at records over some years just before an application is due.

Other Tax Updates

Significant tax changes have already been made by the UK Government in light of the Coronavirus outbreak. Of particular relevance to individuals is that the proposed reforms to IR35 (off-payroll working by contractors) have been delayed for a year.

We anticipate that further tax changes may be announced, as the pandemic continues to unfold and we will provide further briefings as and when any relevant announcements are made.

How can we help?

Burges Salmon's Immigration and Tax specialists are available to discuss any legal issues arising from your immigration and residence status in light of the Coronavirus pandemic.

Our lawyers have substantial experience in advising high net worth individuals on complex issues and interactions between UK immigration and tax law including pre-immigration tax planning, tax residence, settlement, naturalisation and domicile.

Please speak to Suzanna Harvey, John Barnett, Emma Heelis-Adams or your usual contact in the team.

Key contact

Suzanna Harvey Partner

  • Head of Private Wealth
  • Private Client Services
  • International Tax

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