The UK health secretary now has powers to quarantine individuals where they present a risk of spreading the coronavirus. As the outbreak worsens, so the possibility of being subject to mandatory isolation increases.
But what impact could this have on your tax position? Do you risk becoming UK tax resident? What if you have to work remotely from the UK, or are the director of a non-UK company and have to make key decisions whilst quarantined in the UK?
Under the UK’s statutory residence test, whether an individual is UK resident for tax purposes or not can depend on the number of days they spend in the UK during the tax year (6 April to the following 5 April). How many days an individual can spend in the UK without becoming UK resident depends on his or her circumstances - in particular how many “ties” to the UK they have.
What if you are approaching the upper limit of the number of days you can spend in the UK without becoming resident and are then quarantined in the UK? Given the proximity to the end of the UK tax year, this could be a real concern for some people.
Thankfully there is a statutory relief that may help you. You will be able to exclude any day that you are in the UK (from your day-count for the statutory residence test) if you are only in the UK at the end of that day as a result of “exceptional circumstances beyond your control that prevent you from leaving the UK”. You must, however, leave the UK as soon as you are able. The number of days that can be ignored under this exception is limited to 60 days in the tax year.
Examples of “exceptional” circumstances include national or local emergencies such as war, civil unrest or natural disasters, and a sudden or life-threatening illness or injury.
Being officially quarantined under the new powers available to the UK government is highly likely to constitute an “exceptional circumstance” for these purposes. However, in order to exclude the days you have been quarantined from your day-count you must leave the UK immediately upon the restrictions being lifted. It is not, however, clear that choosing to self-isolate on the grounds of posing a risk of infection to others will count as an exceptional circumstance beyond your control; this may depend on the extent to which you have been advised or directed by medical professionals not to leave your home or accommodation.
If you decide to come to the UK to care for, or see, someone else who has the coronavirus this is unlikely to qualify as exceptional circumstances, unless the person is your partner or minor child and they are in a life-threatening condition.
If an individual does more than 3 hours of work a day in the UK on more than 40 days in the UK tax year, that individual will have a “UK work tie” for the purposes of the statutory residence test. Having an extra “UK tie” will reduce the number of days you can spend in the UK without becoming resident. If you are quarantined in the UK and decide to work remotely from the UK you should, therefore, take care that you are not giving yourself an extra UK tie.
Carrying out duties of your employment in the UK could also result in a charge to UK tax on your earnings. If you perform employment duties in the UK which are regarded as more than “merely incidental” to your non-UK duties, this could result in a UK tax charge on a proportion of your earnings (even if you remain non-resident).
Non-UK incorporated companies are treated as UK tax resident if central management and control of the company’s business is carried out in the UK.
If you are a director of a non-UK company taking part in board meetings or making decisions in relation to that company while you are quarantined in the UK should not risk bringing the company onshore, provided the business of the company is otherwise managed and controlled outside the UK. However, if possible it would be better to avoid making key and/or strategic decisions in relation to the company’s business whilst quarantined in the UK.