31 March 2020

Tax and immigration implications of the COVID-19 pandemic for individuals and their families

Few would have anticipated only a few weeks ago that by March, a large part of the world, including the UK, would be or have been in virtual lockdown with many planes grounded and borders closed. However, that is the result of the spread of COVID-19 and, while there are clearly many more significant challenges in relation to this virus for health and the global economy, there are also a number of tax and immigration consequences for individuals with connections in more than one jurisdiction, as well as for those based in the UK.

The information provided here is correct as of 31 March 2020. Due to the ever-changing situation we will endeavour to update this as and when new guidance is provided.

Tax for non-residents - the exemption for exceptional circumstances

Lockdown and other travel and social restrictions

Over the last few weeks, we have been contacted by an increasing number of clients who are concerned as to how their tax status will be affected by a period of forced residence in the UK should the country go into lockdown. A nationwide lockdown was announced on the evening of 23 March 2020, and is in place for a minimum period of three weeks from 24 March, to be reviewed on 13 April.

However, it is considered likely that the lockdown will continue beyond this date. At the same time, UK residents travelling abroad have been strongly advised to return to the UK, and individuals who are generally resident elsewhere may be forced to remain in the UK as a result of the closure of the borders of a number of countries and the reduction of available flights to others.

Of equal concern is the position for individuals who are spending more time in the UK now than they would otherwise as a result of COVID-related illness or anxiety of family members who live here. Still others are here because, having been in contact with someone who has or may have the virus, they are required to remain in the UK to self-isolate for a period of 7 or 14 days.

Statutory Residence Test

The reason for these individuals' concerns relates to the statutory residence test (SRT), introduced in 2013 to determine whether an individual is resident or non-resident in the UK for tax purposes for a particular tax year. Broadly, the SRT combines a day-counting test with consideration of the number of "ties" to the UK of the individual concerned. Such ties relate to work, family, accommodation, days spent in the UK in earlier tax years (90-day tie) and days spent in the UK in the relevant tax year compared with the number spent in other countries (country tie). The country tie applies only to individuals who have been resident in the UK in one of the three tax years preceding the relevant year. The number of days of residence in the UK permitted in any tax year varies according to the number of ties an individual has with this country, to a limit of 182 days. If the permitted number of days (counted as the number of days in which an individual is here at midnight) is exceeded in any tax year, the individual will be regarded as resident in the UK for that year.

Exceptional circumstances

The SRT recognises that sometimes, an individual might have to spend time in the UK for reasons beyond their control. For this eventuality, the rules recognise "exceptional circumstances" where this might be the case, and any days spent in the UK as a result of such circumstances are ignored for the purposes of the SRT, subject to a maximum of 60 days in any tax year. Under normal circumstances, exceptional circumstances include local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or a sudden serious or life threatening illness or injury to an individual, including the individual's spouse, a person with whom they are living as husband and wife, their civil partner or dependent child.

COVID-19 guidance

On 19 March, the UK Government published guidance as to specific situations arising from the COVID-19 pandemic that would be considered exceptional for these purposes. While this guidance points out that whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case, a list of situations that would fall into the exception is provided.

If an individual:

  • is quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus;
  • finds themselves advised by official Government advice not to travel from the UK as a result of the virus;
  • is unable to leave the UK as a result of the closure of international borders; or
  • is asked by their employer to return to the UK temporarily as a result of the virus;

the circumstances would be considered as exceptional. The limit remains at 60 days.

Limitations of the COVID-19 guidance

Clearly, while this list is helpful and will be reassuring for many people in the circumstances described in the list, it is quite restrictive. There are a number of situations that might require an individual to remain in the UK as a result of COVID-19 that are not included. Most significantly, it is particularly limiting that the only circumstance in which someone returning to the UK is covered by the exception is where their employer asks them to do so. Those who are self-employed are not covered at all, and nor is anyone who, for example, is working outside the UK but chooses to return here to be with their family at a difficult time, or perhaps to provide support to elderly relatives who are required to self-isolate.

Some parents will already have had to return to the UK as a result of the schools closing, for example, to take their children out of boarding school. They may have been able to arrange flights to leave the UK with their children fairly quickly, but for those who are very close to their annual limit of days in the UK, this could be a problem if such a trip does not qualify as exceptional circumstances under the general rule, as an event occurring as a result of a natural disaster, for example. This is likely to depend on how quickly arrangements to leave the UK can be made.

For many people who fall within the categories listed above, or are otherwise within the scope of the exemption for exceptional circumstances, if these circumstances have only arisen quite recently, it is unlikely that they will exceed 60 extra days of presence in the UK in this tax year, given that it ends on 5 April.

However, for tax year 2020/21, the situation may be very different, and it is to be hoped that the Government will keep the position under review if it becomes clear that self-isolation, lockdown, border closures or any other necessary measures are likely to continue for a significant period of time. Helpfully, the new guidance does indicate that events are changing rapidly as a result of the virus and, accordingly, the guidance may change at short notice as situations change.

Practical points

Anyone who is required to spend more time than they would normally in the UK as a result of the COVID-19 pandemic or related travel restrictions should ensure they keep clear records of the number of days they are here and their dates of arrival and departure, and the reasons for their stay. They should also ensure that they leave the UK as soon as it is reasonably practicable to do so.

While an individual is in the UK, they should try to avoid creating another tie to the UK as far as possible, which would reduce the number of days they are permitted to be here under the general rules. For example, if they do not already have an accommodation tie with the UK as a result of having a place to live, such as a holiday home, available to them for at least 91 days in the tax year, in which they spend at least one night (or 16 nights in the case of a home of a close relative), they should avoid doing so, for example, by staying in a hotel or B&B. Where this is not possible because all such accommodation is closed (as is the case under the current period of lockdown with effect from 24 March), this fact should be recorded in order that all relevant evidence can be presented to HMRC to support a claim that no accommodation tie has been created.

Similarly, if an individual does not already have a work tie by working here for at least 40 days in a tax year, they should avoid creating one during the period they are forced to be here. For this purpose, a day of work is one on which an individual does more than three hours' work, so this leaves scope for maintaining contact with an employer or business during the relevant period, provided this is not abused.

It is particularly important to note that the relief for exceptional circumstances does not apply to the work tie (nor to any tie other than the 90-day tie). Thus, any day of work (within the definition above) would count as a day of presence in the UK even if the individual would otherwise be considered to be in the UK as a result of exceptional circumstances.

Management and control of companies

Another potential tax implication of the increasing travel restrictions relates to the management and control of a company for the purpose of deciding its residence for tax purposes. In general, for UK tax purposes, management and control takes place where decisions are made in relation to the company's business.

In many wealth-holding structures, it is important to ensure that a company is not resident in the UK. Accordingly, effort is made by the company's directors and officers to ensure that all company business, and especially all decisions are taken outside the UK. In the present situation, it may be that such individuals are restricted from leaving the UK to attend meetings, or equally, the jurisdictions in which such meetings may be held may refuse entry to travellers from other countries.

Practical point

While it may be important for company meetings to go ahead, and for officers who are in the UK to attend and hear and discuss the business considered by way of video-conferencing, it is important that any actual decisions are reserved to the officers outside the UK or, if possible, are held over until it is possible for the decisions to be made outside the UK.

In order to evidence how and where decisions have been taken, full minutes should be taken of company business at the meetings, and records of decisions taken should note the physical location of officers involved.

Immigration issues

Countries' travel restrictions put in place as a result of COVID-19 are likely to raise concerns as to their effects on the UK immigration status of those who are in the UK on a visa, or who are in the process of applying for any form of leave to the UK or British Citizenship.

Visa concerns

For some time, the UK's Home Office had published only one guidance note relating to visa issues and (due to when it was prepared in February) it was written primarily for Chinese nationals or nationals of other countries who are normally resident in China. However, on 24 March additional guidance was published by the Home Office and UK Visas and Immigration, confirming (amongst other things) that any visa-holder in the UK (irrespective of their nationality or country of normal residence) who is unable to return home due to the COVID-19 pandemic will get an extension of their visa until 31 May 2020 if their visas expired after 24 January 2020. Individuals in this position must contact the Home Office's dedicated coronavirus team. Although not expressly stated in the guidance, it is expected that this extension also applies to anyone in the UK on a long-term standard visitor visa that lasts 2, 5 or 10 years who has reached the maximum stay of 180 days between 24 January 2020 and 30 May 2020.

A further area of concern is that the UK has suspended acceptance of visa applications from certain countries (including the US, China and most recently, Hong Kong and Singapore), and a number of countries' Visa Application Centres (VACs) have closed. Such steps have ground to an abrupt halt many applications for entry clearance to the UK. The new guidance recommends that individuals who are outside the UK and require advice on visa services in their country, should contact the Home Office's commercial partners: TLS contact (if they are in Europe, Africa and parts of the Middle East), or VFS Global (for all other countries).

Looking internally to the UK's VACs, with effect from 30 March 2020, all sites are now closed. Therefore, while applicants in the UK may continue to submit their applications online, and are being advised to do so, they will be unable to attend an appointment at a VAC in order to enrol their biometric information and complete the application process. This is likely to lead to a significant backlog once the offices re-open. However, the advice of the UK Visa and Citizenship Application Services (UKVCAS) includes an assurance that nobody will be disadvantaged as a result of the COVID-19 crisis.

Indefinite leave to remain and applications for British Citizenship

Applying for indefinite leave to remain (ILR) in the UK requires that applicants (and their dependant spouses if relevant) do not spend more than 180 days outside the UK in any 12-month period during the relevant period of leave to the UK under a visa (this is typically 5 years but can be 2 years or 3 years under certain types of visas). Clearly, it is possible that individuals who travel to their home country (or any other country) in order to visit sick relatives or for any other reason risk being unable to return, whether because of travel restrictions in that country or possibly, travel restrictions put in place by the UK. As yet, no such restrictions have been announced in the UK, but this may be a matter of time.

Similar requirements apply to those applying for British citizenship. In this case, the key requirement is that an applicant has been in the UK lawfully for a continuous period of 5 years (the fifth year of which must have been with ILR status). The applicant should not have spent more than 450 days outside the UK throughout the whole of the 5-year period, and no more than 90 days outside the UK in the final 12 months prior to applying.

In both cases, while the UK Home Office has some discretion to disregard UK absences as breaching the above residence requirements, they can only do so in exceptional circumstances. The Home Office has been silent on whether the current pandemic would fall within this definition. One would expect and hope it would, but we will have to wait for an announcement or guidance on this point for certainty.

Practical points

For those who may breach these residence requirements as a result of COVID-19 travel restrictions or the virus itself, they should compile evidence to show why they are spending more days outside the UK than permitted. For example, records should be kept of when the individual left the UK, when they originally intended to return, and why they were not able to return.

Such records will help evidence (if necessary) the exceptional circumstances preventing the individual from returning to the UK and, therefore, breaching the residence requirements.

Individuals should also ensure that they return to the UK at the earliest possible opportunity, for example, when travel restrictions are lifted.

Final thoughts

The COVID-19 pandemic has created an unprecedented global situation, where laws and restrictions on our movement and personal freedoms are changing on an almost daily basis. Just in the UK, the rules are changing at a rate whereby notes such as this may be out of date almost as soon as they are published.

The situation will become clearer in time, but in the meantime, we will do our best to keep you informed as new rules and guidance appear, and as the implications of new restrictions on areas of law relevant to individuals, their families and their trustees and other advisers come to light.

If you have any questions regarding any of the issues raised in this note, or any other matter relevant to you, please get in touch with your usual Forsters contact.


The current global crisis is evolving rapidly, and the rules and guidance for individuals, companies and other entities to manage its implications are similarly fast moving. Notes such as this may be out of date almost as soon as they are published. If you have any questions prompted by this article or on any other matter relevant to you, please get in touch with your usual contact at Forsters.

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