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When Do ‘Exceptional Circumstances’ Count For UK Tax Residence Status? – Tax Authorities

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The Covid-19 pandemic and recent case law have
highlighted HMRC’s strict stance on individuals caught in the

Whether an individual is UK tax resident in a particular year
under the UK Statutory Residence Test (SRT) is largely determined
by the number of days that an individual spends in the UK.

However, there are reliefs that allow certain days to be
disregarded, effectively reducing an individual’s day count
when applying tests under the SRT. One of these is
“exceptional circumstances” relief, which broadly applies
when an individual is prevented from leaving the UK by exceptional
circumstances beyond their control – but they intend to leave
as soon as those circumstances permit.

Limited relief

The relief is, however, limited. It can only be applied to some
of the residence tests under the SRT, such as the first automatic
UK test (those spending 183 days or more here) and the 90-day tie.
It does not apply to the second automatic UK test (the “only
home” test) and it cannot result in a disregard of UK work
days under the automatic UK resident “full-time work in the
UK” test or the automatic non-resident full-time work overseas
test. In addition, it does not apply to the work or family ties
under the “sufficient ties” test.

There is also a maximum number of 60 “exceptional”
days that can be disregarded for the purposes of the relief. Any
excess must be counted. There are circumstances such as travel
problems or “life events” – for instance, a
marriage or choosing to come to the UK for medical treatment
– that do not qualify under the relief.

Covid-19 update

The pandemic created a raft of unforeseen circumstances and led
HMRC to publish some specific examples that it considered were more
likely to be considered “exceptional” for the purpose of
the relief. These included situations in which an individual had to
quarantine or self-isolate in the UK, where international borders
were closed or where they needed to come to the UK to care for a
vulnerable family member who was shielding or self-isolating.

However, the 60-day limit was not extended to account for the
ongoing pandemic and HMRC did not elaborate on whether the closure
of international borders should be considered in respect of an
individual’s country of normal residence overseas or any other
accessible country. It was also unclear what evidence individuals
would need to provide to evidence any of these Covid-19 specific

Taxpayer v HMRC

The recent case of Taxpayer v HMRC [2022] UKFTT 133 (TC)
is significant because it adds much needed flesh to the bones of
the exceptional circumstances relief. It provides further detail on
when an individual is unable to leave the UK and the significance
of foreseeable circumstances.

In this case, the taxpayer (who had previously been a UK tax
resident) was residing in the Republic of Ireland and filed a tax
return in the UK for the 2015/16 tax year as a non-resident,
relying on a claim to exceptional circumstances. The taxpayer was
hoping, as a non-UK tax resident, that she would avoid income tax
on dividends received during this time.

The exceptional circumstances she claimed concerned multiple
emergency visits to the UK to care for her alcoholic and suicidal
sister and her children.

However, HMRC challenged the taxpayer’s filing position
arguing that the circumstances were not truly exceptional and were
not beyond the taxpayer’s control because the taxpayer was
aware of her sister’s alcohol dependence and mental health

HMRC also argued that the relief does not apply to a taxpayer
who has come to the UK because of exceptional circumstances and
these have prevented them from leaving. Instead, the relief applies
to those already in the UK, and while in the UK, the exceptional
circumstances prevent them from leaving.

The First-tier Tribunal agreed with the taxpayer and found that
the relief conditions were met and so the taxpayer could disregard
the midnights spent in the UK visiting her sister and caring for
her children.

Key takeaways

The key takeaways of the case are as follows:

  • The purpose of the relief is to prevent unfair outcomes
    resulting from day counting under the SRT where an individual is
    unable to leave the UK due to circumstances they cannot

  • Whether circumstances are exceptional is based on the facts of
    a given case. Exceptional circumstances are not necessarily rare.
    However, they cannot be circumstances that are regularly

  • While foreseeability is a factor when considering whether
    circumstances are exceptional, there is no requirement for
    circumstances to have been unforeseeable.

  • Exceptional circumstances can arise when the individual is
    outside the UK, if the circumstances require the individual to come
    into the UK, and then prevent them from leaving.

  • Where exceptional circumstances arise due to another
    individual’s illness or injury, there is no requirement for
    such an individual to be a spouse/partner or dependent child.

  • Whether an individual is prevented from leaving the UK can be
    considered from a practical, moral or legal perspective and not
    just from the physical inability to leave the UK. For example, in
    this case, the individual had access to a private jet but it was
    impractical to travel back and forth the UK and Ireland given the
    care duties required.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.


UK Tax Round Up

Proskauer Rose LLP

Welcome to July’s edition of the UK Tax Round Up. This month has seen an interesting decision of the First-tier Tribunal on the salaried member rules as they apply to asset manager LLPs,

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