Internationally mobile taxpayers, such as expats, freelancers and company founders are among those that have been affected by pandemic travel restrictions and the UK’s statutory residence test (SRT).
HMRC has responded by introducing legislation (s109, Finance Act 2020) and publishing guidance to help affected taxpayers. But according to the ICAEW, things are not exactly looking fair.
When it comes to nomadic freelancers, expats and company founders that live abroad, their days could be numbered so to speak. The days where they were unable to leave the UK due to COVID-19 travel restrictions over the two-year pandemic will continue to count as “UK days” for the purpose of the 183-day statutory residence test, the ICAEW has reported.
This is a blow for those affected as it could mean seeing remuneration packages impacted and/or having to pay higher taxes. For corporate expats, they may have some room for negotiation with their employer on any related costs. However, freelancers only have themselves to foot the bill, so they should discuss their situation with an accountant right away to see how these costs should be reported and accounted for in their financial accounts.
The legislation, however, has allowed certain individuals present in the UK for work related to COVID-19, to disregard certain elements of the statutory residence test (SRT). Examples of this include working as a medical or healthcare professional or in relation to the development or production of medical products related to COVID-19.
The legislation applied for the period from 1 March 2020 to 1 June 2020 and made sure that days spent in the UK and UK ties were disregarded for all SRT tests, said the ICAEW.
- Agent Update 90 provides a list of the guidance
However, for those interested, ICAEW’s Tax Faculty has also published TAXguide 08/21: COVID-19: stranded expatriate employees: statutory residence test and social security contributions. This comprises the text of correspondence with the Financial Secretary to the Treasury and HMRC in which:
- the faculty requested improving the impact of the strict application of the statutory residence test on the remuneration of employees who were unable to leave the UK because of COVID-19. The faculty also made recommendations as to how this might be achieved and drew attention to the limitations of HMRC’s Annex D guidance, and suggested further and improved guidance.
- HMRC explains how it is applying income tax and NIC/social security law in such cases.
Useful links:
- HMRC’s Agent Update of 17 November 2021
- ICAEW Tax Faculty’s TAXguide 08/21
👀 Look out for The Freelance Informer’s upcoming report on freelancer visas
In the meantime, check out these related articles. Please make sure you look for the most updated information on travel restrictions and visas through the UK Gov site or your destination’s consulate or embassy:
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