I mainly live abroad but have not been able to return home due to global travel restrictions and self-distancing / self-isolating requirements. I am concerned that I have spent too much time in the UK. Will there be any impact on my residence or domicile status? What about the impact on the tax status of my business?
HMRC have published guidance confirming that days spent in the UK for the following reasons should be considered "exceptional circumstances", and therefore potentially ignored for the purposes of calculating the number of days spent in the UK under the UK's statutory residence test:
You are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus.
The UK Government officially advise you not to travel from the UK as a result of the virus.
You cannot leave the UK as a result of the closure of international borders.
Your employer asks you to return to the UK temporarily as a result of the virus.
Currently, the maximum number of days spent in the UK in "exceptional circumstances" is 60 – but this limit too may be subject to change in light of the pandemic. The statutory residence test rules are complicated and days spent in the UK due to exceptional circumstances may not be disregarded in all situations. If an individual is tax resident in any one tax year, it will impact the number of days he or she can safely spend in the UK in the following two tax years as well as how soon he or she will become deemed domiciled for tax purposes.
If you are non-UK domiciled and you think it is possible or likely that you may inadvertently become UK tax resident in the 2020/21 tax year that starts on 6 April, you should seek urgent advice now. That is because there are important planning steps you should take before the start of the tax year in which you become resident. Without planning for this possibility, the tax consequences could be very significant and you only have a few days to do so.
You may find yourself unable to leave the UK for a range of reasons (quarantine, closure of international borders etc.) but you will need to continue to manage and run your business. Decisions made in the UK during this period may have an impact on the tax status of your business. Broadly, a business is resident where its central management and control takes place rather than the day to day management of its affairs. If senior members of the businesses are not making the usual key business decisions from their usual country of tax residence, this could have significant tax repercussions as it could expose the business to UK corporate taxes on its global profits. If you think your business may inadvertently become UK tax resident in the 2020/21 tax year that starts on 6 April, you should seek urgent advice now . That is because there are important planning steps you should take before the start of the tax year in which you/the business become UK resident. Without planning for this possibility, the tax consequences could be very significant and you only have a few days to do so.
I would like to make gifts to my children (or other loved ones) to help them during this period. Are there any relevant tax considerations?
There are several tax issues to consider when making gifts to family members. When giving an asset away it is possible to trigger a capital gains tax (CGT) charge on any increase in value between the date of acquisition of the asset and the date of the gift.
Also, any gift to a flexible family trust is immediately chargeable to inheritance tax (IHT) where the value of the gift exceeds the tax-free allowance of £325,000. With current low values, it is possible to transfer more assets in to trust now and still remain within the tax-free threshold. There can be no retrospective IHT charge if those assets subsequently increase in value to pre-Covid-19 levels.