Relaxation on tax residency rules during COVID-19 crisis

The government has announced a temporary relaxation to the UK’s tax residency rules for overseas individuals working in the UK on COVID-19 related activities, but this should have happened much earlier, and could have gone much further, said the tax and advisory firm Blick Rothenberg.

In an open letter to the treasury, the chancellor, Rishi Sunak has said overseas individuals contributing to the fight against the COVID-19 crisis should not be concerned about becoming UK tax resident, given the time they are physically spending in the UK, and has announced a temporary relaxation to the tax residency rules.

Nimesh Shah, a partner at the firm said: ‘The move signals the government’s desire to attract more individuals from abroad to come to the UK to support the efforts against the COVID-19 pandemic.

He added that: ‘It is welcome announcement by the government to relax the residency rules so that overseas workers do not need to worry about their tax position.

‘However, this should have happened sooner in a bid to encourage more overseas individuals to come to the UK to support the efforts against COVID-19.

‘The UK’s strict day-counting rules when it comes to tax residency, some individuals would not have wanted to run the risk of becoming UK tax resident, and the UK could have already lost out on a much-needed human resource.

He noted that: ‘The UK’s tax residency test is broadly based on the number of days an individual spends in the UK.

‘The temporary change to the residency rules will mean that the days spent working in the UK between 1st March and 1st June on COVID-19 matters will effectively be ignored for the day counting.

‘The initial three-month period could be extended as the situation evolves, in line with the other government measures.

Shah concluded that: ‘The government could have gone even further by introducing a complete tax exemption on earnings for overseas individuals working in the UK in the fight against COVID-19.

‘At a time when the UK is in desperate need of all the support it can get, the government should do everything it can to attract the best talent to the UK.’


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