Since 2013, tax residence for the UK has been determined by the statutory residence test which lays down in very specific legislation the circumstance under which you will be classed as UK tax resident. For many, this means that the number of days that they are allowed to be in the UK at midnight is restricted so for anyone relying on being not UK resident for tax purposes, counting your days in the UK and keeping records is important. If you exceed your day count in the UK then the only way to remain not UK resident for tax is if some of those days fall within a very narrow relief for exceptional circumstances.

An FTT decision last year however, appeared to widen the circumstances under which exceptional circumstances could be claimed. Generally the relief HMRC guidance focused on circumstances where an individual was prevented from leaving the UK, so prior to this, what was deemed to be an emergency requiring you to actually come to the UK was largely untested. The tax at stake was £3.6 million and the individual came to the UK knowing that these days would push them over their day count, so this was quite a risk to take on the taxpayer’s part. That risk appeared to be justified when the FTT decision found in their favour and the days were deemed to be covered by exceptional circumstances.

However, the Upper Tribunal has now reversed this decision. Whilst the headline facts of the case seem to support exceptional circumstances involving an alcoholic sister and vulnerable children, reading through the evidence and comments in the judgement there are definitely holes which suggest that the taxpayer underestimated how deep HMRC would actually dig. So, for example, if you are claiming to be in the UK for emergency purposes, if it is in your itinerary your PA schedules weeks before with your private plane pilot planned route taking it into account, this might suggest otherwise. It is certainly a reminder that the amount of evidence HMRC can now trace regarding your intentions and exactly what you spent money on during the days in the UK is significant, so make sure that these will support any statements you intend to make.

The Upper Tribunal decision also reinforces the fact that each day has to be considered separately. So coming to the UK for an emergency does not necessarily extend to days two and three etc as the question you need to answer each day is whether you can support the position that it wasn’t feasible to have left the UK before the end of the day due to the ongoing emergency. This feasibility also seems to have taken into account the taxpayer’s specific facts, so a private plane on standby at your personal disposal and your non-UK home being an hour’s flight away can certainly make it more difficult to say you couldn’t leave and return in the morning.

You can read details of the case here.

If you want to speak to us about UK tax residence and planning contact Nadine Crosby