The recent row over the texts between James Dyson and Boris Johnson on the changes to the statutory residence test (SRT) has served as a reminder that the SRT is complex and that the covid-19 related relaxation of the SRT has been very tightly drafted.
Unlike in some countries, the HMRC response to the severely reduced ability of individuals to travel over the last 12 months has been relatively limited. Although covid-19 has been explicitly recognised as capable of constituting an ‘exceptional circumstance’ for the purposes of the SRT, this (as James Dyson pointed out to Boris Johnson) is not a blanket exception from becoming UK tax resident with all the resulting tax consequences.
For example, even if a day is disregarded from the overall day-count due to exceptional circumstances, it will still constitute a work day for the purpose of the work-tie and for the automatic non-UK test for full-time work overseas. If an individual spends a period of 31 days in the UK without working for three hours overseas on any day in that period, they will have a ‘significant break’ and be unable to meet the requirements of the full-time work overseas test.
Last year’s Finance Act (at FA 2020 s 109) did, however, enact the change requested by James Dyson, to allow individuals to be present in the UK for work related to covid-19, either as a medical professional or in relation to the development or production of medical products. This change applied only for the period 1 March to 1 June 2020 and ensured that any days spent in the UK for those purposes were disregarded for all SRT tests. Further, any ties created as a result of spending those days in the UK are ignored.
For everyone else, there has been no change to the 60 days per tax year limit of exceptional circumstance days which can be deducted. Given the duration of the pandemic and the various lockdowns, it is likely that many individuals will have been present in the UK for more than 60 days during the 2020/21 tax year due to covid-19 restrictions.
As the limit is statutory, HMRC has no power to disapply it and, with the current media spotlight on the changes made to the SRT following the exchange with James Dyson, it seems unlikely the government will take the necessary action to amend it.
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Covid-19 and the statutory residence test
The recent row over the texts between James Dyson and Boris Johnson on the changes to the statutory residence test (SRT) has served as a reminder that the SRT is complex and that the covid-19 related relaxation of the SRT has been very tightly drafted.
Unlike in some countries, the HMRC response to the severely reduced ability of individuals to travel over the last 12 months has been relatively limited. Although covid-19 has been explicitly recognised as capable of constituting an ‘exceptional circumstance’ for the purposes of the SRT, this (as James Dyson pointed out to Boris Johnson) is not a blanket exception from becoming UK tax resident with all the resulting tax consequences.
For example, even if a day is disregarded from the overall day-count due to exceptional circumstances, it will still constitute a work day for the purpose of the work-tie and for the automatic non-UK test for full-time work overseas. If an individual spends a period of 31 days in the UK without working for three hours overseas on any day in that period, they will have a ‘significant break’ and be unable to meet the requirements of the full-time work overseas test.
Last year’s Finance Act (at FA 2020 s 109) did, however, enact the change requested by James Dyson, to allow individuals to be present in the UK for work related to covid-19, either as a medical professional or in relation to the development or production of medical products. This change applied only for the period 1 March to 1 June 2020 and ensured that any days spent in the UK for those purposes were disregarded for all SRT tests. Further, any ties created as a result of spending those days in the UK are ignored.
For everyone else, there has been no change to the 60 days per tax year limit of exceptional circumstance days which can be deducted. Given the duration of the pandemic and the various lockdowns, it is likely that many individuals will have been present in the UK for more than 60 days during the 2020/21 tax year due to covid-19 restrictions.
As the limit is statutory, HMRC has no power to disapply it and, with the current media spotlight on the changes made to the SRT following the exchange with James Dyson, it seems unlikely the government will take the necessary action to amend it.
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