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Change in residency due to Covid

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Has anyone came across a situation where a client has been stuck in a country during lockdown for a while tax year and then either became a UK resident again (after being a non resident) or Vice Versa - are there any exceptional circumstances to take into account here? 

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By gainsborough
03rd Aug 2021 15:06

Yes, I have exactly the same situation for one of my clients - outside the UK for the whole of 20/21 and auto non-UK resident for that year.

The Government have published details on exceptional circumstances for individuals stuck in the UK but I haven't seen anything on the reverse situation for someone stuck abroad from a UK point of view (although some overseas countries have published guidance re overseas residence).

So, the main things to do will be to run through the residence tests, read the DTA between the UK and the overseas country and also check whether the individual invested in an ISA whilst non-UK resident.
EDIT: Also watch out for the temp NR rules for capital gains.

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Replying to gainsborough:
By Catherine Newman
03rd Aug 2021 19:10

Yes My client failed the number of days in the UK test and he worked here. One of the top 4 firms in the UK said we claim up to 60 days exceptional circumstances but then attach Helpsheet 304. We didn't put the UK workday income anywhere in pages 1-8 on the SA return but claimed Treat Exemption by attaching a pdf of Helpsheet 304.

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Replying to Catherine Newman:
By armstrongbell
03rd Aug 2021 22:13

I have a couple of clients in the same position - stuck in the UK when usually non-resident. One is a USA citizen so will be taxed on worldwide income there. He is self employed, usually in another country (not USA) but due to Covid carried out work for that country from the UK. Are you saying I could leave the self employed income off his UK tax return so that it is just taxed in USA? (DTR with other country means it is taxed in USA not there). I was thinking I might need to complete the SE figures on the UK return, have him pay the tax here and then he claims it back in USA? Would be easier if not though. His time in the UK due to Covid exceeds the extra 60 days exemption. I'd appreciate any thoughts.

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Replying to Catherine Newman:
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By Matrix
04th Aug 2021 10:51

When you subtracted the 60 days then did this make the client non resident? Do you mind me asking for a contact who you used?

I have a client who is way over the number of days which makes her UK resident with a huge UK tax bill and would like a second opinion. Thanks

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accountant in london
By Accountant in London
04th Aug 2021 10:38

In addition to the usual SRT/DTT points already mentioned, These are the issues that I needed to deal with.

1. The client is the sole director of UK LTD, so they had to appoint another UK resident director to avoid corporate residency issues.

2. Director's salary will only be paid for work done in the UK physically. This was the plan all along, however, the 'physical' bit did not happen. Additional note added to the tax return for this. The client did 'UK director work' from the foreign country.

3.They also stopped signing all the contracts on behalf of the company. The other Uk resident director does that.

4. PPR relief on their main UK home.
NRCGT rules start to apply, however where there is dual-residency a PPR claim need to be made each year under s.222(5) to ensure full PPR relief is available when the main home in UK is sold.

5. As the client decided to stay on in the foreign country, they have to create a proper presence in that country - i.e. bank accounts, gym membership, learn the language etc.

6. And a real struggle to find a suitable local accountant in the foreign country who actually understands both sides of the coin! TBH this has been the most frustrating issue.

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Replying to Accountant in London:
By accountantccole
04th Aug 2021 14:00

We cover UK/ France if you ever need French help

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By exceljockey
04th Aug 2021 10:38

We have a client who went to Australia in Feb 2020. He is Australian but resident in the UK for tax purposes. However, he kept working in Oz during lockdown and it went quite well and so has now bought a house and is staying there. So I think it is fine to treat him as no resident for the 2020/21 tax year. It doesn't make a huge amount of difference to him though as his tax in Australia is higher than in the UK.

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