An individual is treated as being in the UK if they are present here at midnight at the end of that day. This means that the day an individual arrives in the UK is treated as a UK day, however, departure days do not count.
This ‘midnight’ rule will not count in the case of exceptional circumstances. This means that if the individual is in the UK at midnight, but not by choice, and there are exceptional circumstances beyond their control which mean they cannot leave, the midnight rule will not apply.
Exceptional circumstances will apply where an individual has no choice in the time they spend in the UK and includes scenarios such as:
HMRC do not normally deem life events (such as marriage, birth, death or divorce) as exceptional circumstances. They also don’t view travel issues, such as a broken down car or missed flight due to traffic disruption as exceptional circumstances.
In a recent case with HMRC, a taxpayer left the UK for Ireland on 4 April 2015 and was paid dividends of approximately £8 million in the 2015/16 UK tax year.
The taxpayer claimed that they were non-UK tax resident for the 2015/16 UK tax year and therefore not taxable on UK dividends received.
She was in the UK for a total of 50 days, which exceeded the 45 days. The only way she could be treated as a non-resident in the UK is if exceptional circumstances applied.
The First Tier Tribunal (FTT) decided that exceptional circumstances applied in her case. She was caring for her twin sister’s minor child caused by her sister’s alcoholism.
The Upper Tribunal (UT) overturned the FTT decision and said that illness and death were not themselves exceptional. A moral obligation to remain in the UK to support somebody did not make them exceptional circumstances.
Therefore the taxpayer was a UK tax resident during the 2015/16 UK tax year. The dividends paid were taxable in the UK.
It is clear that the bar has been set very high as regards exceptional circumstances. As Benjamin Franklin said in 1789 “Nothing is certain except death and taxes”.
In this latest case perhaps the taxpayer should have asked herself the question “Do I definitely know I won’t be in the UK for more than 45 days?”.
Despite the introduction of the SRT, residency issues remain a complex area. We have considerable expertise in this area and if you require any advice in this area, please do get in contact with us.
