HM Treasury on Thursday proposed amending what is known as the statutory residency test to ensure that work in the country between March 1 and June 1 on "COVID-19 related activities" would not count toward a tax residency test. The measure is meant to allow those entering the U.K. to avoid having their global income fall into HM Revenue & Customs scope.
"We will also keep the duration of this measure under review as the situation develops, in line with the other support already provided," Rishi Sunak, the U.K. chancellor of the Exchequer, said in the letter.
"This measure will provide flexibility and support to those coming to work in the U.K. to serve the national cause," Sunak said.
The measure is required "in response to extraordinary circumstances," but the U.K. government remains committed to statutory residence tests and "to ensuring that all individuals pay their fair share of tax," the letter said. It said that the measure would be included in a forthcoming finance bill and that details on eligibility and the measure's scope would be provided.
In late March, tax residency rules based on the number of days a taxpayer spends in the country but does not engage in any work were relaxed amid travel restrictions in response to the global outbreak of the novel coronavirus, which causes COVID-19, a respiratory disease. Under the relaxed rules, someone forced to reside in the U.K. for the duration of the crisis will not be considered a tax resident.
The rules for nondomiciled taxpayers, or non-doms, state that U.K. residents with permanent homes outside the U.K. may not have to pay U.K. tax on foreign income if they spend a majority of their time outside the country. While the rules are intended to allow for secondments — temporary transfers — or other legitimate business needs, the term non-dom is often used to refer to wealthy individuals in the U.K. and is closely tied to the idea of a deliberate tax avoidance strategy.
In the tax year 2018-2019, there were 223,000 nonresident taxpayers. More than 2,600 of those claimed at least one day in the U.K. as being because of exceptional circumstances, according to HMRC.
HM Treasury had no additional comment.
--Editing by Robert Rudinger.
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