In HMRC v A Taxpayer [2023] UKUT00182, the Upper Tribunal found that looking after an alcoholic sister and her family was not an exceptional circumstance for the Statutory Residence Test (SRT). The taxpayer exceeded her day limit by six days so was UK resident, resulting in tax on £8m of dividends.

The taxpayer, named in the decision, claimed she was a non-UK resident for under the terms of the Statutory Residence Test (SRT) in 2015-16.

  • A Taxpayer 'AT' was UK domiciled and had moved to Ireland with her daughter on 4 April 2015. 
  • She claimed non-residency on the basis that six of the days she spent in the UK during the tax year should be disregarded as:
    • She was only present in the UK on those days due to exceptional circumstances outside of her control which prevented her from leaving the UK.
    • She intended to leave the UK as soon as those circumstances permitted.
  • The exceptional circumstances occurred on two occasions when she came to the UK to care for her sister and her small children due to her sister suffering from alcoholism and being suicidal. There was a family history of abuse and suicide.
  • HMRC assessed her to tax on £8m of dividends received during 2015-16 on the basis that she had not shown that the exceptional circumstances (which they agreed were present) prevented her from leaving the UK on each day in question as she had access to a private jet and could have returned to Ireland each evening.
  • The FTT found that all six days in question were due to exceptional circumstances and allowed the appeal on the grounds that:
    • Exceptional circumstances can include foreseeable circumstances.
    • The exemption is not restricted to coming to the UK under a legal obligation or being prevented from leaving by a physical event and does not preclude anyone who comes to the UK under an obligation of conscience to care for a family member.
    • The exemption can apply if it is the exceptional circumstances that cause the taxpayer to come to the UK, it is not limited to where an individual already in the UK cannot leave due to circumstances arising during their stay.

HMRC appealed to the Upper Tribunal which allowed their appeal:

  • The circumstances of the taxpayer's visits to the UK were not exceptional and she had not proven that was not prevented from leaving the UK on any of the six days in question by exceptional circumstances. It did not help that she was very vague about what she had done during the six days in question.
  • Alcoholism was not an exceptional circumstance therefore caring for someone suffering from it was not either. There was no evidence that the degree of suffering and distress caused by the sister’s alcoholism and depression was more than that which commonly arises in families who are affected by those conditions.
  • The taxpayer was resident in the UK for 2015-16.

As this was the first appeal the UT had heard on exceptional circumstances and it disagreed with the approach taken by the FTT in not requiring the taxpayer to prove that she had met the statutory conditions for each day in question, the court decided that it would be helpful if it set out an approach which could be taken by the FTT in future cases. It outlined:

  • Consider separately each of the days for which the taxpayer is claiming to have met the exceptional circumstance requirements.
  • For each of those days:
    • Establish the facts which the taxpayer asserts relate to each of the five elements of the statutory test, the burden being on the taxpayer, namely that:
      • The circumstances were exceptional.
      • The circumstances were beyond the taxpayer’s control.
      • The taxpayer would not have been present in the UK at the end of that day but for those circumstances.
      • The circumstances prevented the taxpayer from leaving the UK.
      • The taxpayer intended to leave the UK as soon as those circumstances permitted.
    • Establish the facts which the taxpayer asserts show that the circumstances changed so as to allow the taxpayer to leave the UK after the end of the relevant day or days; this will shed light on whether the taxpayer was previously prevented from leaving by the exceptional circumstances.
    • Consider which facts are objectively proven, either by documents or credible oral evidence or by both.
    • In the light of those proven facts, decide whether each of the statutory requirements has been satisfied.

Useful guides on this topic

SRT: Statutory Residence Test
What is the statutory residency test? Why is it important and how does it work?

SRT: Day Counting Toolkit
This is a day-counting toolkit for the Statutory Residence Test.

SRT: Statutory Residence Test Toolkit
This is a freeview interactive tool to determine 'At a glance' whether you are UK resident or not in a tax year for 2013/14 onwards.

Non-resident Tax Toolkit
This toolkit covers the key UK tax issues for non-UK resident individuals holding UK assets and property and working in the UK. 

External link

HMRC v A Taxpayer [2023] UKUT00182  

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