HMRC's latest campaign of nudge letters targets UK self-assessment taxpayers in relation to the "exceptional circumstances" exemption in the UK's Statutory Residence Test (SRT) (our previous article on nudge letters considered HMRC's recent focus on offshore corporates which own UK situs property).
In this context and as a general rule, exceptional circumstances are unavoidable and result in the individual either remaining in or returning to the UK.
Under the SRT rules, an individual's total days spent in the UK can be reduced by the number of days attributable to exceptional circumstances when assessing UK tax residence. HMRC's internal manual provides examples of exceptional circumstances in hypothetical scenarios. One particular example is in the case of an individual, or their immediate relatives, sustaining serious injuries requiring hospitalisation in the UK.
It may come as a surprise that life events such as birth, divorce, or death, are not normally considered to be exceptional circumstances. However, the First-tier Tribunal, in A v HM Revenue & Customs  UKTT 133 (TC), confirmed recently that the examples provided for in legislation are non-exhaustive and HMRC should not take a narrow interpretation of circumstances which should be treated as exceptional.
Time spent in the UK due to the UK Government's response to the COVID-19 pandemic
Regarding the 2019/20, 2020/21 and 2021/22 tax years, HMRC updated its guidance to cover which circumstances resulting from the Government's response to the COVID-19 pandemic would constitute exceptional circumstances.
HMRC confirmed that the following may be treated as exceptional:
- being quarantined or advised by a health professional or public health guidance to self-isolate in the UK; or
- finding yourself advised by official Government advice not to travel from the UK; or
- being unable to leave the UK as a result of the closure of international borders; or
- being asked by your employer to return to the UK temporarily.
However, this is all subject to a significant caveat a maximum of 60 days spent in the UK can be attributed to exceptional circumstances in one tax year. Once this threshold is surpassed, all days spent in the UK count towards an individual's tax residence assessment. Somewhat unhelpfully, HMRC only confirmed this once individuals had already been unable to leave the UK for more than 60 days due to lockdown restrictions.
HMRC also relaxed the rules on days spent in the UK by 'skilled workers' (the long list of eligible occupations covers every part of the economy, ranging from air traffic controllers to poultry dressers) in the 2020/21 tax year undertaking COVID-19 related work during the national lockdowns, subject to a 57-day limit.
HMRC's nudge letters in relation to SRT
Following a review of self-assessment tax returns, HMRC issued en masse nudge letters that summarise its guidance on SRT day count, highlighting common mistakes. These are addressed to individuals that HMRC believe may have potentially miscalculated their days in the UK across a tax year resulting from exceptional circumstances. These exceptional circumstances letters differ from other nudge letters, insofar as they do not enclose a Certificate of Tax Position to complete. Instead, the letter urges individuals or their agents to review their UK tax status and, if required, amend their relevant tax return. Despite being in a different form, the aim of the nudge letter remains consistent with previous batches sent by HMRC; placing the onus on individuals, rather than HMRC, to correct any inaccuracies in their tax historic affairs.
What should you do if you have received a nudge letter?
For a detailed explanation of what you should do if you have received a nudge letter, or HMRC's general use of nudge letters, please consult our previous article or contact a member of our Tax Disputes & Investigations Team.