COVID-19: Taxing times

Posted on 22 April 2020

The UK Government and administrative bodies have implemented changes to mitigate the effects of the COVID-19 pandemic and to allow transactions and other work to continue from home.

Some of the key tax-related measures for individuals and companies are as follows:

UK tax residence allowances for individuals

Under the UK's statutory residence test (SRT), an individual is broadly UK tax resident depending on the number of days they spend in the UK. However, HMRC have published guidance confirming that up to 60 days spent in the UK under quarantine, recommended self-isolation, travel-ban or request by an employer, as a result of COVID-19, can be ignored for the purposes of certain elements of the SRT. This should prevent certain persons from becoming tax resident (and in turn potentially deemed domiciled) in the UK for reasons beyond their control, which could have a significant impact on their UK tax liability and in relation to any trusts to which they are connected.

Control and management allowances for non-UK businesses

If senior members of businesses are making key business decisions from the UK, the company may inadvertently become UK tax resident or have a UK permanent establishment, which could give rise to significant tax repercussions and reporting obligations for the company and employees alike. However, HMRC and the OECD have agreed that any temporary residence in the UK by company directors, or occasional board meetings held in the UK due to COVID-19 restrictions, should not impact upon a company's permanent establishment nor its tax residence. 

Employment support under the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme enables all UK employers (including charities and not for profit organisations) to apply to continue paying 80% of their employees' salary costs for employees furloughed (on a leave of absence) as a result of the COVID-19 pandemic. Employers can also claim the cost of employer national insurance contributions.

Permitted delay to filing tax returns and paying tax liabilities

  • Individuals unable to pay tax due to COVID-19 can apply to HMRC to delay their self-assessment payment on account due in July 2020 until 31 January 2021. If less than £10,000 tax is owed, they may be able to arrange to pay by instalments.
  • For businesses unable to pay their tax due to COVID-19, HMRC have set up a helpline and will discuss payment and filing options.
  • UK VAT registered businesses with VAT payments due between 20 March 2020 and 30 June 2020, may apply to defer that payment due to COVID-19 without incurring interest or penalties.

Easing on HMRC inquiries

HMRC has written to taxpayers asking them not to request information or responses in respect of HMRC investigations, and in some cases has suspended the investigations completely.

Read the latest COVID-19 related updates on our hub.

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