There are people currently in the UK who are usually tax resident elsewhere. They might originally be from Britain, or another country.

The tax rules around non residency are very specific and these people may be worrying about overstaying their allotted time because of Corona virus travel restrictions. This can lead to large tax bills, if they are asked to pay UK income tax on their worldwide earnings. HMRC have announced that they will use “exceptional circumstances” regulations to avert this financial worst case scenario. A great relief.

What is non resident tax status?

If you are registered as UK non resident for tax purposes, it means you can only spend between 16 to 183 days in the UK during any one tax year. Going over this limit, in normal circumstances, means that you have to pay UK tax on your earnings for that tax year.

Being UK non resident for tax purposes doesn’t mean that you don’t pay any income tax at all. It means that you pay tax on your income in your country of residence.

For example, if you left the UK to live in Spain and become registered for tax in Spain, you just pay tax on your earnings to the Spanish government. Not in Britain and Spain. No one wants to pay tax twice on the same income.

There is provision for special events and emergencies within the UK non resident rules. You can be in the UK for up to a maximum of 60 additional days for medical emergencies, funerals and special events, in the same year. And this won’t affect your tax paying position.

What is the current problem?

More countries close their borders to help prevent the spread of Covid-19, leaving some of their residents stuck in the UK. As well as the obvious health fears, people in this situation will be worrying about the potential of large UK tax bills if they have over stayed their allotted number of days.

What is HMRC’s solution?

HMRC have issued internal guidance called: ‘Residence: The Statutory Residence Test (SRT): Main contents: Coronavirus (COVID-19)’. This states that all of these circumstances will be considered “exceptional” and mean that you will not end up with an extra UK tax bill:

  • “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”

This is commendably swift work by HMRC and should enable people to put health concerns at the top of their decision making.

HMRC also said this is “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.” So if you’re in this position, get your paperwork in order. Cases will still be considered on an individual basis and you may need evidence to support you during an investigation, which is unlikely to be done for another 18-24 months.

HMRC aren’t scrapping the existing rules for everyone, regardless. They are putting an sensible emergency measure in place so that people don’t travel when they shouldn’t, because they are afraid of a big tax bill. If you are unsure what evidence to keep, get in touch with your accountant or tax agent now. Then you won’t need to worry about it at all.