Covid’s impact on UK taxMy stories today focus on expatriate tax as opposed to vaccines for example or new viruses. In other words, most expatriates have suffered many different Covid inconveniences, but today’s spotlight will be on tax. There is very good news at the end, if you want to skip. I am an expatriate tax professional based in the UK and my foundation skills are in UK tax. However, when it comes to tax planning and Covid, I have been working with expats on tax in Saudi Arabia, Singapore, Zambia, Spain, Germany, USA. It’s a very long list.
Saudi Arabia and tax residence
Let’s dive straight into a story that has affected hundreds if not thousands of people. During 2020, the Saudi Arabian government closed their borders for extensive periods due to Covid ie several months at a time. I know several UK nationals who were sent home from their Saudi jobs to their UK homes to “wait it out”. However, they became trapped outside their assignment country (KSA). In other words, before Covid, they had been happily treated as UK non-resident for tax; and spending little time here in the UK. Instead they were suddenly spending several months back in the UK, and jeopardising their UK non-residence status. It has been a dreadful headache for many clients.
If I was writing a client advice paper now, this paragraph would cover a tax technical review of the key issues. (Eg the rules governing permitted days in the UK. We could examine the UK tax definition of exceptional circumstances etc). This article is not a deep technical piece because this is not the place (every client case is different).
In the Saudi Arabia story, the main headlines are that these people have been spending 4, 5, 6 and more months back in the UK. They infringed the UK residence rules ( aka “SRT”) and it has been a heck of a fight to overturn or reverse this outcome. Many clients are determined to challenge HM Revenue & Customs ( if they lose the initial fight) since they feel very hard done by. I am dealing with each person case by case to determine with any leniency is possible at HMRC.
A home in Dubai
In the UK, we have a number of tax tests which consider whether a person has an “available home” or permanent home in the UK or elsewhere. Due to Covid, this has thrown up quite a few problems. There was the engineer who was due to move to Dubai, but travel restrictions prevented his move for long periods. He had no regular home in the UK, just staying with a friend. In Dubai, he had a rented flat waiting for him, but can we really call this an available home if he cannot visit the country ? In the tax world, the location of your main home can strongly influence your tax position. Covid and new travel rules have created harsh tax issues around this. Again, I look at this area on a case by case basis because personal facts are diverse.
Covid tax benefits
Question : have we seen any UK tax benefits or UK advantages triggered by Covid in 2020, 2021 ? We did not witness many clients on furlough, but we observed many expats of course retreating to their home offices and continuing to work full-time. For the self-employed in the UK there have been generous business grants (SEISS) and we have applied for these on behalf of clients. One must not forget that these grants are taxable and reportable on UK tax returns, and therefore sorry to rain on any parades.
FANTASTIC tax benefit
Sorry to sound like a cheap commercial. I’m signing off with positive Covid tax related news, to highlight a UK scheme which is genuinely beneficial. HMRC’s Time to Pay scheme allows all taxpayers to apply to pay their taxes owed by instalments. For those who owe less £30,000, they ( or their tax advisor) may go online to apply for a 12 month instalment to lessen the impact of personal tax bills. This scheme was “pepped” up the UK Chancellor in direct response to Covid. It is highly popular with my clients eg an £8,000 tax bill can be spread over the whole year following tax return filing. I am very happy to praise and commend the simplicity of this scheme.