We have previously written about the method by which UK tax residency is determined and whilst these rules have not changed, the pandemic has restricted the freedom of international movement and as a result HMRC have published guidance.
HMRC guidance states that for the purposes of day counting under the statutory residency tests, they will consider that the circumstances are ‘exceptional’ (and therefore disregarded) if you:
- Are quarantined or advised by a health professional to self-isolate in the UK as a result of the virus.
- Find yourself advised by official Government advice not to travel from the UK as a result of the virus.
- Are unable to leave the UK due to the closure of international borders.
- Are asked by your employer to return to the UK temporarily as a result of the virus.
The maximum number of days which can be disregarded is 60, but it should be noted that this does not apply to all of the residency tests.
You will need to keep records and documents in support of any claim you make to have days spent in the UK disregarded due to exceptional circumstances.
Now boarders are opening up, and given flexible working arrangements offered by some employers, we are starting to see an increase in queries from people looking to work in other countries – perhaps where the temperature reaches 25˚ on a more regular basis…
In determining where income is taxable it is important not only to consider your residency status (whether this is in the UK or any other country) but also the nature and source of that income.
The UK has double taxation agreements (DTAs) with over 100 countries – these set out the basis of taxation where a taxpayer is resident in one or both countries and the taxing priority of each income source.
The tax years and rules for determining residency status differ between jurisdictions and it is therefore possible to be resident in more than one country simultaneously (or none). In those circumstances, the DTA sets out the matters to be considered. An individual is deemed to be resident:
- In the country in which they have a permanent home available to them. If a permanent home is available in both countries, they shall be deemed to be resident in the country in which their personal and economic interests are closer (centre of vital interests).
- If the centre of vital interests cannot be determined of if they have no permanent home available in either country, they shall be deemed resident in the country in which they have a habitual abode.
- If they have a habitual abode in both countries or neither, they shall be deemed to be resident of the country of which they are a national.
- If they are a national of both countries or neither, the competent authorities of each country shall settle the question by mutual agreement.
There may be slight differences depending on the country of relevance, so it is important that assumptions are not made.
Once deemed residency status has been determined it is then necessary to look at the nature and source of the income, and again this varies depending on the specific country. In some cases the income is taxable in only one place, but where this is not the case unilateral relief is usually available to prevent double taxation. This is simply relief for tax paid in the other country, but it should be noted that the income must be of the same nature i.e. the tax treatment of the income must be the same in each country.
If you are considering a move from or to the UK and would like to know the tax implications and any associated tax planning opportunities, please do not hesitate to contact the office where one of our team will be happy to help.