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Unfortunately, anyone relying on spending 90 days or fewer in the UK in a tax year to ensure they remain non-resident, may be in for an unpleasant surprise.
We are contacted by a large number of individuals who are of the understanding that they can simply spend less than 90 days in the UK in any given tax year and they will be not resident for UK tax purposes.
This is incorrect. It is essential that you review your position under HMRC’s Statutory Residence Test to understand the amount of days that you can spend in the UK without impacting your desired residency status.
Those that had planned to be non resident in the UK during the 2020/21 tax year will also have to factor in the impact of COVID-19 and the closure of international borders. Delays to your departure from the UK will have an impact on the number of days that you can spend in the UK for the rest of the tax year and could potentially increase the number of ties that you have with the UK. HMRC have recognised that a lot of people were simply unable to leave the UK even if they wanted to. If you were unable to leave the UK as a result of the closure of international borders or if you were required to quarantine in the UK as a result of the virus, this will be classed as an exceptional circumstance and you will be able to disregard up to 60 days of those spent in the UK when looking at your overall UK days of presence.
Will there be a rise in individuals accidentally becoming tax resident in the UK?
For those individuals who have already established tax residency overseas but make the occasional visits to see family, business meetings etc, there may be issues to consider if you have spent an excessive time in the UK due to COVID-19. You should seek advice to clarify the impact on your residency status. Remember, as a UK resident you will be subject to tax on your worldwide income unless a claim for the remittance basis can be made if you are a non- UK domiciled individual.
Tax & Remote Working
The substantial increase and success of remote working means that UK resident individuals have been able to take on overseas employment or contracts, without setting foot into that other jurisdiction…
So, who has taxing rights over this income – the UK or the home country of the employer who is employing the individual?
Usually employment income is taxed where the services are being provided. However, the other jurisdiction may also want to tax the same income and therefore you may be subject to double taxation. The UK has a number of double tax treaties with overseas jurisdictions which try and resolve such situations and will normally give taxing rights to one of the countries. This may mean that you are taxed twice, but you should be able to claim relief for taxes paid in the form of a foreign tax credit against your tax bill in the ‘secondary’ jurisdiction. This may have a knock-on effect on any social security payments due.
This is made more complex where an individual is resident in both jurisdictions during any tax year. For such individuals who work overseas but routinely take trips home, it is likely that you will have dual residency if you are spending a significant amount of time in the two countries.
If you are having difficulties understanding your residency position or how your remote working contract is taxed, we would be happy to provide you with advice. Simply contact a member of our helpful tax team or be sure to read more about non resident tax and non domicile tax below.