Menu
Tax Notes logo

Johnson Sets Tough Restrictions to Tackle Coronavirus in U.K.

Posted on Mar. 24, 2020

People in Britain must now stay at home and will be allowed to leave for only “very limited purposes,” Prime Minister Boris Johnson declared in a televised address late March 23.

People will be able to leave their homes only for shopping for basic necessities, for one form of exercise a day, for medical needs, or for traveling to work that is "absolutely necessary and cannot be done from home," Johnson said.

“To ensure compliance with the government’s instruction to stay at home, we will immediately close all shops selling nonessential goods, ​including clothing and electronic[s] stores and other premises, including libraries, playgrounds, and outdoor gyms, and places of worship. We will stop all gatherings of more than two people in public — excluding people you live with — and we’ll stop all social events​, including weddings, baptisms, and other ceremonies, but excluding funerals,” Johnson added.

Coronavirus Bill

Earlier on March 23 members of Parliament debated a 320-page coronavirus bill granting wide-ranging powers to the government. The bill includes or enables measures regarding education, health and social care, the maintenance of food supplies, social distancing, and border control.

The bill would pave the way for regulations allowing employers paying additional statutory sick pay to employees for COVID-19-related absences to recover payments from HM Revenue & Customs. It would also allow for the temporary suspension of the three "waiting days" — during which no payment is made — for employees absent from work due to COVID-19, “should this be necessary,” according to an explanatory note. The measures are intended to ensure that employees who self-isolate in accordance with current guidance are deemed incapable of work and entitled to statutory sick pay. The bill would also allow the government to modify existing procedures regarding National Insurance contributions temporarily.

During the second-reading debate March 23, several MPs called on the government to extend income support to self-employed people affected by business closures and travel restrictions. A package of measures announced by Chancellor of the Exchequer Rishi Sunak March 20 includes a new coronavirus job retention scheme enabling employers to apply for an HMRC grant to cover up to 80 percent (subject to a limit of £2,500 per month) of the wages of U.K. workers who are not working but remain on the payroll. Sunak also announced the deferral of income tax and VAT payable by the self-employed.

Residence Test Clarified

Days spent in the United Kingdom because of self-isolation or travel restrictions in response to COVID-19 may be disregarded in some circumstances for the purpose of the tax residence test, according to new guidance.

HMRC noted in a March 19 update to its Residence, Domicile and Remittance Basis Manual that the coronavirus pandemic “may impact your ability to move freely to and from the U.K., or require you to remain unexpectedly in the U.K.”

Whether days spent in the United Kingdom can be disregarded because of exceptional circumstances “will always depend on the facts and circumstances of each individual case,” HMRC said. However, it indicated that the circumstances will be considered exceptional if the taxpayer is quarantined or advised by a health professional or in public health guidance to self-isolate in the United Kingdom as a result of the virus; advised in official government advice not to travel from the United Kingdom as a result of the virus; unable to leave the United Kingdom as a result of the closure of international borders; or asked by an employer to return to the United Kingdom temporarily as a result of the virus.

HMRC has indicated that it will look sympathetically at any individual case where the pandemic has caused difficulties. At this stage, HMRC does not plan to issue any further guidance on this issue, and the wider rules, such as the 60-day annual limit, are still in place and relevant,” the tax faculty of the Institute of Chartered Accountants in England and Wales said in a news release March 20.

Finance Bill

A finance bill based largely on the draft measures set out in July 2019 was published on the Parliament website March 18, together with explanatory notes. The bill received its first reading March 17, but no date for the second reading has been announced. Jacob Rees-Mogg, leader of the House of Commons, noted March 23 that some finance bill measures must be passed within a set period following the presentation of the related budget resolutions. The House of Commons will close for a three-week Easter recess March 31.

The bill is relatively short, running to 175 pages, of which 43 pages are occupied by the digital services tax regime set to take effect in April. A tax information and impact note on the DST was published March 11, alongside the budget.

Planned changes to the IR35 off-payroll regime were omitted from the bill after the government announced a one-year delay in response to the economic impact of the coronavirus pandemic. Stephen Barclay, chief secretary to the Treasurystressed that the government is not canceling the reforms. The government remains committed to “reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly,” he told MPs March 17.

HMRC updated its off-payroll working guidance March 23 to reflect the delay, which means that until April 2021, a worker’s personal services company will remain responsible for determining whether a private-sector engagement is caught by the antiavoidance rules.

Copy RID