Statutory Residence Test and exceptional circumstances

2 Aug 2023

Man walking in airport

An individual’s tax residence status in the UK is determined by the Statutory Residence Test (SRT), the application of which is heavily reliant on the number of days spent in the UK during the tax year (more information regarding the UK Statutory Residence Test is available).

A day is generally counted as a ‘UK day’ when an individual is present in the UK at midnight, although this is subject to certain exceptions including when individuals are only transiting through the UK.

Days may also be ignored if the individual’s presence in the UK was due to exceptional circumstances beyond their control. HM Revenue & Customs (HMRC) consider this to usually apply to events which prevent an individual from leaving the UK. This may include local or national emergencies, civil unrest, natural disasters, the outbreak of war, or sudden life-threatening injuries or illnesses.

The maximum number of days that may be discounted is 60 days per tax year. Any days in excess of the 60 days will count towards the individual’s UK day count regardless of whether they are due to exceptional circumstances.

HMRC have set out in their manuals a number of examples illustrating what they consider to be exceptional circumstances; however, in practice HMRC have often applied a very narrow scope on what they would consider as exceptional.

Examples of circumstances not normally considered to be exceptional circumstances as per HMRC’s manuals include:

  • Life events such as birth, marriage, divorce and death.
  • Choosing to come to the UK for medical treatment.

It is also important to note that there are also specific sections of the SRT where days spent in the UK are not disregarded for exceptional events. For example when ascertaining whether an individual has the accommodation tie under the sufficient ties test of the SRT, time spent at a property in the UK will be taken into account, even if the individual was here due to exceptional circumstances. Advice should therefore always be sought when relying on days being disregarding for exceptional circumstances.

Presence in the UK relating to the Covid-19 pandemic

Days spent in the UK due to closures of international borders due to Covid-19 or due to following self-isolation requirements in line with government advice may be considered exceptional. However, this is still subject to the same 60 days per tax year limit.

It should be noted that days spent remotely working from the UK due to international closures due to Covid-19 would still be treated as UK workdays; even if they are disregarded for other tests due to exceptional circumstances.

A taxpayer v HMRC

On 19 April 2022, the first tax case on exceptional circumstances with respect to the SRT was heard in the First-tier Tribunal (FTT).

The taxpayer is a UK citizen, domiciled in the UK and was previously resident in the UK with her husband and children. She moved to Ireland on 4 April 2015 and declared herself non-resident under the Statutory Residence Test in the 2015-16 tax year. However, the taxpayer’s twin sister, with whom she was very close, was having severe problems in this time, including a bitter custody battle over her children, alcohol and drug dependency, and (claimed the taxpayer) was suicidal. As a result, the taxpayer travelled repeatedly to the UK to support her sister, which resulted in her exceeding the 45-days she was able to spend in the UK without being UK tax resident under the SRT. The taxpayer claimed the `exceptional circumstances’ exemption of the SRT legislation.

HMRC argued, firstly, that the taxpayer should have foreseen the need to support her sister when she left the UK, and this prevented the circumstances from being exceptional. Secondly, HMRC claimed that the exceptional circumstances test did not apply where a person came to the UK under a moral obligation, only where there was a legal obligation (such as the need to care for a minor child) or a physical obligation (such as a volcanic eruption grounding flights). And thirdly, HMRC argued that the exemption only applied to people who were already in the UK when the exceptional circumstances overtook them. In all three arguments, the FTT found that the statutory language of the test did not support HMRC’s interpretation. Moreover, the FTT was clear that the examples in the legislation are not exhaustive and therefore circumstances which do not correspond with these examples may qualify as exceptional.

The UT reversed the decision of the FTT. One key issue was that the taxpayer’s lack of evidence to demonstrate that on each additional day she spent in the UK, they were prevented from leaving due to her sister’s circumstances. Whilst the FTT had been critical of the taxpayer’s lack of detail and records on what she did during her visits in the UK, the UT considered there was a lack of necessary evidence.

The UT also took the view that a moral obligation is not sufficient to meet the criteria of exceptional circumstances, because they are subjective rather than objective. In particular, it was noted that where an individual remains in the UK because of a moral obligation, it is not the circumstances which prevent them from leaving but their sense of moral obligation.

The UT also found that the circumstances of this case were not exceptional as they were neither life-threatening (following the FTT finding that the sister had not in fact been suicidal) nor sudden.

Whilst the UT decision will be less welcomed by taxpayers seeking to rely on days being excluded due to exceptional circumstances, it serves as a useful reminder of how important documentation is for the purposes of the SRT. The lack of evidence of what the taxpayer did on each day she remained in the UK, and therefore why she was required to be here was critical.

If you have any queries regarding the SRT rules and your personal situation, get in touch with your usual Saffery contact, or speak to Alexandra Britton-Davis.

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Alexandra Britton-Davis
Partner, London

Key experience

Alex advises high net worth individuals, trustees and family offices on their UK tax affairs, estate and succession planning. In...