Day counting – 7 key points for UK residency tax planning

15/06/2020

By David Snelling

Are you an internationally mobile individual with links to the UK? Perhaps you’re a UK citizen who now works and lives mostly overseas? Maybe you’re planning to do so in the near future?

Alternatively, are you an overseas citizen who has business in the UK or is looking at a work opportunity which would mean spending time in the UK now or in the future?

If any of these scenarios apply to you then you may be conscious of the rules concerning ‘day counting’ for assessing your UK tax residency status. In fact, this will likely become an obsession as some people have spreadsheets and audit trails set up to track days spent in and out of the UK!

And the reason individuals go to such great lengths to ‘day count’? Because becoming inadvertently UK tax resident can be an expensive overnight stay.

Considering the importance of this, here is a brief list of things to consider when ‘day counting’ to help guide you on your day counting journey.

This is particularly an issue now due to the recent Covid-19 outbreak. An unintentional side effect of lockdown has been that individuals are stranded in the UK when, in other circumstances, they would not be in the country.

If this is an issue for you, you should definitely read on.

7 things to consider when ‘day counting’

  1. You may be able to claim ‘exceptional circumstances’ to reduce your number of UK-based days for the Statutory Residence Test. This occurs if a situation arises which is completely out of your control and prevents you from leaving the UK. For example, a completely unexpected and sudden illness or injury causing a necessary stay in a UK hospital is likely to be deemed as ‘exceptional’. HMRC has issued guidance that the coronavirus pandemic is likely to constitute an ‘exceptional circumstance’. Therefore, people stuck in the UK due to this may be able to claim up to 60 days as exceptional circumstances (each tax year) if they meet certain criteria.
  2. You will be subject to the notoriously confusing Statutory Residence Test. This is examined in our more detailed client guide which you can read here.
  3. The number of days you’re allowed to be in the UK for tax purposes varies depending on your specific circumstances.
  4. You must be in the UK at midnight for a day to count as a day spent in the UK. This means you can theoretically fly in and out of the UK during the same day and, as long as you were not in the UK at midnight, the day won’t count as a day spent in the UK. Perhaps, one of the reasons ultra-high net worth individuals like private jets!
  5. You should keep a thorough audit trail to be able to prove how many days you spent inside and outside the UK. This should be based on midnight UK time. Keep plane/train tickets and anything that can prove you were in a certain place at a certain time. You may want to set up a spreadsheet to track where you were each day in a tax year.
  6. Being in transit in the UK doesn’t usually count even if you’re in the UK at midnight, as long as you leave the next day. However, you cannot do anything which isn’t typical for a transit. For example, you cannot go to meet family or friends, but you can have your breakfast in your hotel or at the airport.
  7. You will have to calculate your days spent in the UK in line with the UK’s tax year which runs from 6th April to 5th April each year.

The rules around UK tax residency are complex and you should seek expert advice if this is something that is currently or potentially relevant to you.

If you would like more in-depth information on ‘day counting’ and the Statutory Residence Test, read our free detailed guide.

For more information regarding UK residency tax planning, please contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.

 

Note – This article does not constitute financial advice and you should always consult a qualified financial professional before undertaking any financial planning. The information in this article is based solely on our understanding as at the date of the article. Government legislation can change at any time.

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