HMRC queries ‘exceptional circumstances’ claims made via self-assessment returns

HMRC is sending letters to those who have completed their self-assessment returns claiming days for ‘exceptional circumstances’ relating to the statutory tax residence test.

When determining whether an individual is resident under the statutory residence test (SRT), days attributed to exceptional circumstances can be disregarded in some cases. This effectively means that an individual can be treated as non-resident in a tax year in which they may have otherwise been treated as UK resident.

As a result of the pandemic, HMRC’s guidance was extended during 2019/20, 2020/21 and 2021/22 to set out when days may be considered ‘exceptional circumstances.’

In April 2020, the then-chancellor also announced temporary changes to the SRT for skilled persons moving to the UK to work on COVID-19-related activity. These changes meant that periods spent in the UK by such individuals during the lockdowns would not count towards the residence tests, which protected their non-UK earnings from UK taxation, although the qualifying criteria was targeted to selected people whose skillset was required, to minimise the risk of abuse. However, these concessions did not solve all the related problems, as HMRC did not extend the exception beyond 60 days.

Now that many of the 2020/21 self-assessment returns have been submitted, HMRC has seen that some individuals have included days attributed to exceptional circumstances that go above the legislative limits.

HMRC will write to unrepresented customers directly and those with acting agents will receive a copy of the letter. The letter will contain consolidated guidance references in a single help sheet and highlight the common errors. Taxpayers and agents are being urged to check their filings against the guidance and amend the return where any of these errors apply.

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