HMRC Statutory Residence Test and Covid-19: Important Changes

July 29, 2020

By Jenna Ideson (Personal Tax Senior) at RMT Accountants & Business Advisors Ltd

The Statutory Residence Test (SRT) was introduced by HMRC and brought into effect in the Finance Act 2013 on 6 April 2013. The purpose of the test is to help determine the tax residence status of an individual within the UK tax year. An individual’s UK tax residence status affects whether they need to pay tax in the UK on their foreign income, or their UK sourced income only. Residence status can change from one tax year to the next, therefore it is imperative that any individual that spends periods of time outside of the UK reviews their residence status each tax year to avoid being caught out and reporting their status incorrectly.

The SRT considers the amount of time an individual spends in the UK, the connections they have to the UK and where relevant, the amount of days worked in the UK. The SRT is split into the following parts:

  • Automatic overseas test
  • Automatic UK test
  • Sufficient ties test
  • Split years

Each of the tests above have their own qualifying rules and must considered in the above order. Application of the SRT and considering the parts of each test can be very complex, and we would advise speaking with a tax professional if you are unsure of how the rules apply to your own circumstances.

The UK is currently dealing with an unprecedented health crisis which has affected millions of individuals, including those who may usually work or live abroad for some or part of the UK tax year. Temporary changes to the SRT guidance have been introduced by HMRC to provide a more sympathetic approach from a tax perspective to those individuals who are forced to return to the UK or are stuck in the UK for issues relating to Covid-19, such as country border closures or having to self-isolate in the UK.

Generally, an individual’s UK tax residence status will be determined by the amount of days spent in the UK in a tax year. Since the introduction of the SRT, HMRC have allowed for an additional 60 days on top of your relevant day count if they can be attributed to “exceptional circumstances”. This allows you to ignore up to an additional 60 days when calculating your UK day count, if the discounted days qualify as exceptional under HMRC’s criteria.

Previously, HMRC guidance classed exceptional circumstances as a situation which is out of the individuals control and is preventing them from leaving the UK. This included situations such as civil unrest, natural disasters and sudden illness or injury. Situations such as planned surgery and marriages or births within the family do not count as exceptional, as HMRC would expect the individual to know in advance the days they would be spending in the UK and take them into account in their calculation of days.

The HMRC guidance on exceptional circumstances was updated in March 2020, shortly after the UK “lockdown” was announced. The exceptional circumstances rule has been broadened to allow an individual to discount up to an additional 60 days if the days are attributable to:

  • Time spent quarantined or advised by a health professional to self-isolate in the UK.
  • Told by official Government advice not to travel from the UK.
  • If you are unable to leave the UK due to international border closures.
  • If your overseas employer asks you to return to the UK temporarily.

Although the rules have been broadened to include the above circumstances, there are still various clauses and parts of the residence test which can and cannot be considered when determining the number of days spent in the UK. For example, if you usually qualify as a non-UK tax resident by qualifying for the third automatic overseas test, you can claim up to an extra 60 UK days on top of the usual permitted 90 days as exceptional circumstances. You cannot, however, apply the exceptional circumstances rule if you have a significant break from overseas working of 31 days or more.

HMRC guidance must therefore be read in detail and applied to each individual’s circumstances as there is no blanket approach.

Please note on 9 April 2020 in a letter to the Chair of the Treasury Committee, the Chancellor Rishi Sunak confirmed that time spent in the UK in the period 1 March 2020 to 1 June 2020 by individuals working on COVID-19 related activities will not count towards the residence tests and can be discounted. This includes doctors, nurses, anaesthetists and engineers working on ventilator design and production.

For further information or assistance with anything highlighted in this article please contact:

Jenna Ideson (Personal Tax Senior)
t: 0191 256 9500

Chris Moir (Head of Personal Tax)
t: 0191 256 9500


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