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COVID-19 and the statutory residence test: The devil and his detail

04 June 2020

Thursday 4 June marks the 60th day since the beginning of the 20/21 UK tax year. For some individuals who have been in the UK since 6 April, that may mean an effective ‘day zero’ for the purposes of day counting under the statutory residence test, with Friday 5 marking ‘day one’. However any individuals who assume this to be the case might be about to make a costly mistake, as the application of the Covid-19 crisis to the statutory residence test remains far from clear and full of caveats.


Under the statutory residence test (SRT) an individual can assess whether or not they will be UK tax resident for any given tax year, often by reference to a ‘day count’ test which requires individuals to tally up the number of midnights that they spend in the UK. For many, exceeding a threshold of perhaps 90 or 120 midnights will be the difference between being UK tax resident and not.

Built into the SRT legislation is a carve out for when an individual finds themselves stuck in the UK as a result of ‘exceptional circumstances’. The carve out allows the individual to deduct up to 60 days from their day count in any given tax year. However, HMRC have historically taken an extremely restrictive view of the meaning of ‘exceptional circumstances’, arguing that it is limited only to the most extreme of circumstances such as a sudden and unforeseen life-threatening illness, or civil unrest back home.

It therefore came as a welcome surprise when, very shortly after the UK began to move towards full ‘lockdown’ in mid-late March, HMRC issued guidance that appeared to offer a less restrictive interpretation of the meaning of ‘exceptional circumstances’ for individuals affected by Covid-19. Essentially, HMRC acknowledged that individuals would find themselves unable to leave the UK as a result of the ‘lockdown’ and appeared to accept that those circumstances would count as exceptional. The full guidance can be found here.

Points to consider

As ever with UK tax law and HMRC guidance, some level of caution, or at least reflection, is advised. The devil is in the detail. Any individuals who assume that they can simply discount 60 midnights from their day count as a consequence of being stuck in the UK may find themselves making a costly mistake, given that a number of open questions and caveats apply. We have set out just some of these below:

  1. The (non-)binding nature of HMRC guidance
    HMRC’s guidance is just that – guidance. It is not binding law. There have been a number of cases over the years where HMRC have gone back on statements given in guidance such as this, and such an outcome becomes even more likely if HMRC consider that the taxpayer is pushing the boundaries or where other circumstances cause HMRC to reconsider their stance (such as aggressive tax positions elsewhere in their tax return). Reliance on guidance always contains some element of risk.
  2. Politics
    During the Covid-19 crisis HMRC have adopted a more ‘taxpayer-friendly’ attitude than has been the case for many years, putting enquiry and investigation activity on hold and allowing deferral of payments, among other things. The guidance can arguably be viewed in that light. The danger for taxpayers is that any arguments with HMRC about whether they can discount days currently being spent in the UK are likely to take place at some point in the future, perhaps a couple of years from now. At this time the UK budget deficit is likely to be of such a magnitude that a reversion to the pre-Covid, much more aggressive approach seems inevitable.
  3. Intention to leave
    In addition to there being exceptional circumstances, the SRT requires an individual to ‘intend to leave the UK as soon as those circumstances permit’ if they are to be eligible to discount days. Such an intention is best evidenced by the individual actually leaving the UK. But when is the ‘lockdown’ considered sufficiently released that a person would be deemed to have left sufficiently quickly? How does the openness of the borders in the individual’s ‘home’ country impact this? What if they have multiple homes in multiple countries? This additional requirement to obtain the relief leaves a number of questions open.
  4. When did the individual arrive?
    A key open question is the extent to which HMRC will attempt to argue that an individual was too late in entering the UK to avail themselves of the relief. Will it be expected that an individual was already in the UK when HMRC issued their guidance on 19 March? Or is the relevant date that of when the main restrictions were imposed on 23 March? What if an individual arrived later than that, perhaps on the 24 or 25 March? Would it be relevant if they did so on a pre-booked flight, or alternatively at short notice to avoid being separated from their family? None of these questions are straightforward and all go towards the assessment of risk.
  5. Other pitfalls
    We would also remind individuals seeking to rely on the guidance that during a ‘prolonged’ stay they must be careful not to gain any more ‘ties” to the UK which would act to reduce the number of days available to them. For example the ‘work tie’ means that you should not complete more than 3 hours work in the UK for more than 39 days in a tax year. Work is widely defined by HMRC. This might be harder to comply with during a year that could see an individual in the UK for an additional 60 days. Some individuals will also need to be mindful that they do not meet the ‘country tie’ by spending more time here than in any other country. Finally, individuals who have not had a home available to them overseas for the whole of the tax year risk becoming automatically resident in the UK if they stay in any one UK ‘home’ for more than 30 days. There are obvious practical consequences to this in the current climate.


The HMRC guidance was a welcome development, indicating a more helpful and pragmatic approach than in the past. However, the question of discounting days in the context of Covid-19 remains far from straightforward. The above are just a few of the many points that will need to be thought about before a decision can be taken on the level of risk and there are many more. Given that a number of non-resident individuals will be working to 90 or even 120 day limits for the year ahead, many still have it within their power to remain under their day count limits without needing to rely on exceptional circumstances. Those that choose to do so may find they avoid some difficult arguments down the line.

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