At the end of 2019/20 one of your clients left the UK to avoid becoming deemed domiciled here. They were delayed due to the coronavirus outbreak. Could this jeopardise their status for the tax year?

Statutory. UK tax residence is determined by the statutory residence test (SRT). This provides a definitive status for each tax year. Having a UK residence for a tax year can be a hindrance, for example it counts as a year toward the historical tax years test for deemed domicile status.

Deemed. In order to avoid triggering this status, one of your clients, who splits their time between the UK and another country, had planned to leave the UK in early March to base themselves overseas for a few years. There are significant offshore assets that they are keen to keep out of the UK tax net. Unfortunately, their leaving was delayed due to the outbreak of the coronavirus, meaning they are just over the day count for UK residence in 2019/20. Can you help them?

Exceptional. The SRT does permit the number of days you have to include to be reduced in “exceptional circumstances” as discussed at RDRM13210. You could therefore look to ignore these days when assessing your client’s status. But will HMRC accept it?

Proof. An individual may very well need to show that they are unable to leave the UK but have made every effort to leave to utilise the discount. This could be demonstrated by cancelled flights or government advice to avoid all travel to particular countries where the virus may be at its peak. Advise clients to retain as much evidence of this as possible, e.g. printing out government advice or emails from airlines.

Warning. Exceptional circumstances can only apply for a period of up to 60 days. If you have clients who will be affected should travel restrictions from the UK increase going forward, they could find themselves needing to declare their offshore income and gains.

Pro advice. Look at the possibility of claiming the remittance basis or using double tax treaties to minimise the impact.

Clients may be able to discount days spent in the UK if they were prevented from leaving due to “exceptional” circumstances. Advise them to keep evidence that they were following government advice to back this up.

The Next Step

HMRC guidance – RDRM13210

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