HM Treasury has proposed changing the rules to allow skilled nonresidents to come to the United Kingdom to help with its COVID-19 response without affecting their tax residency status.
Chancellor of the Exchequer Rishi Sunak confirmed April 9 the government’s intention to amend the law so that any period between March 1 and June 1 would not count toward the statutory residence tests of individuals who come to the United Kingdom to work on coronavirus response-related activities. He proposed the change in a letter to Mel Stride, chair of the House of Commons Treasury Committee.
The United Kingdom welcomes the expertise of those who want to help the United Kingdom fight the COVID-19 pandemic, such as anesthetists and engineers who can work on designing and producing ventilators, Sunak wrote. “Under normal circumstances, the actions and presence of these individuals in the U.K. could affect their own tax residence status, potentially bringing their global earnings within the purview of U.K. taxation,” he added. “It is right that these changes are time limited and only support those people whose skill sets are currently required.”
As a result, HM Treasury will design the qualifying criteria to target the rule change and curb abuse risks, Sunak said, adding the government would review its duration as the situation unfolds.
The relaxation of the statutory residence test “will provide flexibility and support to those coming to work in the U.K. to serve the national cause,” Sunak added. While the measure is necessary to respond to an extraordinary situation, the government is still committed to the statutory residence test framework and to ensuring everyone fulfills their tax obligations, he said.
“Further details on the eligibility and scope will be provided in due course and this change will be legislated in the forthcoming Finance Bill to take effect from 1 March 2020,” Sunak wrote. Finance Bill 2020 was published March 19, and is now in the House of Commons, which took an early Easter recess. The bill will have a second reading on April 22.
Under the statutory residence test, individuals are considered U.K. tax resident if they have been in the country for 183 days in a tax year. HMRC has established several criteria and tests to determine the amount of time an individual has spent and worked in the United Kingdom for tax purposes, including the connections or “sufficient ties” an individual has in the country.
Individuals are deemed U.K. tax residents if they don’t meet one of the three automatic overseas tests, meet one of the three automatic U.K. tests, or have sufficient ties. HMRC includes family ties, accommodation ties, work ties, and 90-day ties when considering residency.
Sunak’s latest letter to Stride comes amid a raft of emergency measures that the U.K government has announced in recent weeks to keep the U.K. economy going during the coronavirus crisis, including a coronavirus bill granting the government wide-ranging powers.
HMRC on March 19 also updated its Residence, Domicile and Remittance Basis Manual to clarify that days spent in the United Kingdom because of COVID-19-related self-isolation or travel restrictions may be disregarded in some situations under the tax residence test.
News of Sunak’s correspondence also coincided with April 9 reports that Prime Minister Boris Johnson, who had been hospitalized after being diagnosed with COVID-19, was out of intensive care and showing signs of recovery.