Clarity on exceptional circumstances for UK tax residence

Working out your UK tax residence position is complicated, but we recently got some helpful clarity from the first-tier tribunal on the “exceptional circumstances” rules and fulfilling moral obligations to family members that are in the UK.

What is the Statutory Residence Test (“SRT”)?

An individual’s UK tax residence status for a tax year is determined under the Statutory Residence Test (“SRT”). An individual is generally either a UK resident or non-UK resident for a whole tax year.

The number of days an individual spends in the UK in a tax year is crucial to most elements of the SRT (a day counts when present in the UK at midnight).

Exceptional Circumstances

In some cases, it is possible to “disregard” up to 60 days of presence in the UK in a tax year.

While the definition of exceptional circumstances is broad and understandably difficult to be covered exactly in legislation, for a day in the UK to be disregarded as “exceptional circumstances”, a number of conditions must be met:

  1. The circumstances must be “exceptional”;
  2. Presence in the UK must be outside of their control;
  3. They would not have been in the UK if not for the exceptional circumstances; and
  4. They must intend to leave the UK as soon as the circumstances permit.

Tribunal case

On 19 April 2022, the first-tier tribunal decided one of its first cases with respect to the SRT, and more specifically the application of days in the UK that constitutes “exceptional circumstances”.

The case came down to four key arguments made by HMRC against the circumstances being exceptional:

  • The reason for being in the UK was foreseeable;
  • They were not already in the UK, rather chose to come to the UK;
  • A “moral obligation” to care for a family member is not an exceptional circumstance; and
  • They were not “prevented” from leaving the UK.

The tribunal found in favour of the taxpayer, and therefore the individual’s claim that they were a non-UK resident for the tax year was upheld, and they were not required to pay the tax sought by HMRC. It is still possible for HMRC to appeal the outcome of the case, and we will provide further detail should they decide to do this.

MHA Moore & Smalley can help you with tax residence issues

UK tax residence can be a complex area, and expert experience is required to get the position right.

If you require any assistance or are unsure of your tax residence status and would like to understand your position or would like to understand the tax implications associated with residence, then please do contact us and our dedicated team will be glad to assist.