As an unexpected consequence of travel disruptions caused by the current COVID-19 outbreak, UK expats & non-residents could be faced with an unexpected tax bill, if they fall foul of the Statutory Residence Test (SRT).
Under the rules of the SRT, non-residents and UK expats pay no income tax on their foreign earnings so long as they have been absent from the UK for one complete tax year and spend a maximum of 183 days in the UK in any tax year. However should they fall foul of the SRT by spending more than 183 days in the UK during the year, their worldwide income will be taxable in the UK as they will be deemed UK tax resident.
Given the travel disruption currently occurring around the world this could leave people with no option but to remain in the UK and thus, end up falling foul of SRT.
It is important to note that there are exemptions within the legislation that can be applied under exceptional circumstances. Under these exemptions a period of up to 60 days can be discounted so long as they meet HMRC’s criteria.
For the exceptional circumstances condition to be deemed allowable by HMRC one of the following conditions must be met:
- The individual would not be present in the UK at the end of that day but for exceptional circumstances beyond the individuals control that prevent them from leaving the UK, and;
- The individual intends to leave the UK as soon as those circumstances permit.
Examples of circumstances which HMRC deem could be classed as ‘exceptional’ are;
- National or local emergencies such as war, civil unrest or natural disasters, and;
- A sudden or life-threatening illness or injury.
Whilst it seems likely that the current COVID-19 outbreak will be deemed by HMRC to satisfy these conditions, at this stage there has been no official confirmation. It could be argued that there is nothing currently preventing individuals from leaving the UK, even if their original intended destination it not accessible, as there are other countries they could potentially travel to.
