In A Taxpayer v HMRC [2025] EWCA CIV 106, the Court of Appeal found that a taxpayer was eligible for non-resident status for UK Income Tax purposes due to ‘exceptional circumstances’ relating to her sister’s ill health.
The anonymous taxpayer failed to meet the Statutory Residence Test as she exceeded the number of days she was allowed to be present in the UK for the 2015-16 tax year but she argued that the extra days were accredited to exceptional circumstances.
The taxpayer had received an £8 million dividend in the 2015-16 tax year which HMRC believed should be taxed in the UK due to failure to meet the SRT.
- The taxpayer was a resident of the UK for tax purposes up to 4 April 2014 at which point she moved to Ireland to set up home with her youngest daughter. Her husband remained in the UK.
- The taxpayer’s twin sister, who lived in England with two young children, had considerable mental health issues as well as suffering from drug and alcohol-related issues.
- In December 2015, a representative of the law firm representing the taxpayer’s sister in a custody battle, contacted the taxpayer to raise concerns about her sister's welfare, specifically that she had made references to suicide.
- The taxpayer who had already spent 44 days in the UK then flew to England to support her sister.
- There was another short trip in February 2016 after concerns were raised again for the sister’s welfare.
SRT conditions:
- The taxpayer could meet the SRT tie-breakers 'sufficient ties test' for residence purposes provided she was in the UK for 45 days or less in the 2015-16 tax year.
- It was established that the taxpayer was in the UK on day 50 but the taxpayer argued that six of these days met the criteria in para 22(4), schedule 45 Finance Act 2003.
- Para 22(4) states days are not required to be counted if there are ‘exceptional circumstances beyond the taxpayer’s control which prevented them from leaving the UK’.
In the original First Tier Tribunal (FTT) hearing, the tribunal was satisfied that the taxpayer’s sister had drug and alcohol problems but did not agree that those issues alone were exceptional circumstances. They did, however, attribute exceptional circumstances to the fact some young children needed to be cared for by the taxpayer during her stay with her sister.
The FTT stated that there does not need to be a legal obligation to meet exceptional circumstances, moral obligations and obligations of conscience can qualify for exceptional circumstances.
HMRC appealed to the Upper Tribunal (UT) on the grounds:
- That the FTT had erred in its decision that exceptional circumstances can be met by a moral or conscientious obligation arguing that exceptional circumstances were a matter of law.
- HMRC also suggested the FTT findings were ‘contradictory and perverse’ and circumstances were not exceptional.
The UT set aside the FTT's decision and re-made it in HMRC's favour, holding that there were no exceptional circumstances.
The taxpayer went to the Court of Appeal (CoA).
- The CoA found that the phrase ‘exceptional’ in para 22(4) had no special or unusual technical meaning and the usual English meaning of the word exceptional should be applied.
- The CoA agreed with the FTT that alcohol and drug misuse alone are not exceptional circumstances, similarly depression, serious illness or death may not be attributed as exceptional, but consideration needs to be applied to the situation as a whole. In this situation, the FTT found that there was a possibility of neglect regarding the children, which would be considered ‘exceptional’.
- The CoA agreed with the FTT that there does not need to be a legal obligation to make circumstances exceptional and that a moral or conscientious obligation can prevent someone from leaving the UK.
The appeal was allowed with the FTT decision restored.
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.
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