On Coronavirus: Tax residence and Private Client implications

March 20, 2020
Peter Dempsey


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As has become all too apparent, the Coronavirus crisis has affected international travel significantly: flights are being cancelled and travel bans have been imposed. These events, as well as being painful for many, can have unintended consequences for the residence status of some individuals. I thought it sensible to provide brief thoughts on some of the implications. 

The UK has a statutory residence test that determines whether an individual is a UK tax resident. This comprises of a series of interrelated tests which are evaluated on a case-by-case basis. Often, the UK rules interact with those of other countries, as well as with bilateral double tax conventions. 

UK tax law provides a limited set of measures that help prevent a person becoming a UK tax resident if their presence in the UK is due to, or extended by, exceptional circumstances that are beyond their control. That said, these measures do not apply to all possible scenarios and those that do are subject to an overall cap of 60 days. So, if the crisis lasts for a number of months and the government does not intervene (or HMRC does not apply flexibility) individuals may find themselves becoming – or indeed remaining – UK tax residents for longer than they intended. 

So, anyone who may potentially be affected by this should consider their position, both in the UK and their ‘home’ country, and also other countries where they have significant links. 

It’s also important to bear in mind that the effects can work in reverse: individuals who choose to be a resident for tax purposes in the UK and who live here, but are temporarily abroad and forced to remain there, may find that their plans to be or to remain a UK resident are put in doubt. 

HMRC Update 

On the 9th March, HMRC updated their guidance on their website in relation to ‘exceptional circumstances’ but made no reference to Coronavirus. It is hoped that, in due course, they will make specific statements in relation to personal tax implications such as residence and tax return filling. 

Estate and succession planning 

One final thought of note. The volatility of markets and other asset classes (and resulting lower asset values), together with a wish to provide greater financial security for the next generation, make this a time in which serious thought should be given to passing on assets during one’s lifetime with reduced tax costs or risks. 

In conclusion 

Like so much right now, no-one can confidently predict what will happen next. My advice is to keep abreast of announcements from the government and other authorities and seek professional advice wherever you need to.