With the UK being such a business and tourist hub, many people have found themselves unable to leave the UK due to the Covid-19 Pandemic.
On 17 March, the Foreign and Common Wealth Office (FCO) advised against non-essential travel. Many other jurisdictions closed their borders with the majority of flights cancelled. For many visiting or conducting business temporarily in the UK, these travel restrictions or the requirement to self-isolate has meant leaving the UK has not been possible.
There are then two key considerations. Is my visa still valid if I can’t leave the UK and are my worldwide income and gains now subject to UK tax? It is important to note is that residence for immigration purposes and residence for tax purposes are confusingly two distinct concepts. For example, it is possible for someone who does not have the proper immigration status to be in the UK, to still become UK tax resident. UK tax residence can therefore creep up on the unwitting, as it requires no intention on the part of the individual and no form to be filled in order to apply.
The Home Office has released guidance confirming that if an individual is in the UK and their leave to enter or stay in the UK expires between 24 January 2020 and 31 May 2020, their visa will be extended to 31 May 2020. To get this extension, those affected must fill in an online form. The Home Office previously wanted applications for an extension under this policy to be submitted by email to the Coronavirus Immigration Help Centre. That set-up has since been replaced by the online form. This is only where the visa is expiring for applicants who are unable to leave the UK and were not planning to stay in the UK in the long term and furthermore, another concession has been introduced which allows applicants to apply to change their visa status where they would not normally be able to but again, only if their existing leave to enter or stay in the UK would expire by 31 May. This includes applications where one would normally need to apply for a visa from their home country.
The government has also provided specific updated guidance for automatic visa extensions for healthcare workers, acknowledging the huge contribution the immigrant workforce is making in the fight against coronavirus.
This is great news from a UK Immigration perspective, but tax implications also need to be considered. Individuals who are present in the UK without any intention to stay here have more to think about than just extending their visa status. There could be unavoidable UK tax residence and a significant tax liability.
The Statutory Residence Test to determine UK tax residence is not a single test, but instead comprises a multitude of tests that need to be considered.
HMRC already allow a “safe harbour” of up to 60 days per tax year where an individual is unable to leave the UK due to “exceptional circumstances”. In response to the pandemic, HMRC released updated guidance for those who have not been able to leave the UK due to the Coronavirus. The following will now also be treated as exceptional circumstances:
- Where an individual is quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
- Where an individual is advised by official Government advice not to travel from the UK as a result of the virus
- Where is individual is unable to leave the UK as a result of the closure of international borders, or
- Where an individual is asked by their employer to return to the UK temporarily as a result of the virus.
The current 60 day limit still applies. Exceptional circumstances do not apply to every single test in the statutory residence test. For example, it will not provide protection from UK tax residence in respect of the “work tie” or the “family tie” to the UK. We have been contacted by individuals who are stuck in the UK and as they are able to work remotely, have continued to work whilst they are in the UK. Unfortunately, working on those days they have been forced to remain in the UK due to exceptional circumstances are still counted for the purposes of the statutory residence test, and can still result in UK tax residence. Continuing to work in the UK could also have tax implications for any non-UK company they are a director of. The statutory residence test can be difficult to navigate, and in light of recent events it is more important than ever to seek professional advice as to how the rules affect those stuck in the UK.
Exceptional circumstances will apply in relation to counting days spent in the UK and for the purposes of establishing whether an individual has a 90 days tie. For days spent in the UK due to exceptional circumstances to be discounted from any calculation, an individual must intend to leave the UK as soon as those circumstances permit. If an individual does leave the UK once the exceptional circumstances have ended, HMRC will usually accept this as evidence of an intention to be based in the UK.
Despite the updated guidance being welcome, there is still a lack of clarity over a variety of situations individuals are likely to find themselves in; such as being forced to remain in the UK when a travel companion is forced to isolate or quarantine, or whether an individual is expected to travel to another country with an open border if their home country is still closed, simply to mitigate their days in the UK.
We help put the right planning in place so that for many individuals who find themselves stuck in the UK, the impact of UK tax residence is limited. However without appropriate advice, an individual can find themselves fully subject to UK tax on their worldwide income and gains.
The Pandemic has a number of consequences that can catch out the unaware. It is therefore important at this time to seek both Immigration and Tax advice so that any next step decisions can be managed appropriately.