COVID-19 - Skilled frontline foreign workers receive temporary tax concession

20 April 2020

These are unprecedented times, and we all know the NHS is under enormous pressure. NHS staff in particular are on the front line of this fight against COVID-19, and many have come to the UK from overseas to work or train here, providing us with much needed skills and support across the NHS. I’m sure everyone will have heard Boris Johnston’s heartfelt thank you to the dedicated nurses who took great care of him, both of whom came from overseas. Those same nurses, and indeed the rest of the NHS community, also rely on access to first class and appropriate medical equipment which can only be delivered with the help of skilled engineering expertise and resources.

This is why the Chancellor of the Exchequer, Rishi Sunak, announced very specific legislative changes to the relaxation of the UK  Statutory Residence Test (SRT), very much aimed at skilled foreign workers, who are engaged in the coronavirus fightback in the UK, during a fixed three-month period.

The changes will be legislated in the forthcoming Finance Bill to take effect from 1st March and are relevant to overseas workers who have expertise and skill in front line areas such as anaesthetists, ventilator design and production engineers who have come to stay and work in the UK. Staying in the UK can mean tax residence here, and this is what the government are seeking to address: to encourage and incentivise key workers to remain in the UK, and help us continue to fight COVID-19.

UK tax residence is generally based on the number of days spent in the UK under the HMRC Statutory Residence Test, and the more days spent here, usually means the more chance you will be considered UK tax resident. If you do become UK tax resident, then worldwide income and gains could then become subject to UK tax, i.e. tax would be due on overseas income, which for many could create significant reporting complexities and tax liabilities.

This government concession will mean that UK days spent by affected individuals who remain here in the period 1 March to 1 June 2020 will not be “counted” towards their total UK days when determining their UK residence for the entire tax year. Whilst anyone working in the UK, i.e. carrying out UK duties for a UK employer, will almost always have those earnings subject to UK tax,  this day count concession will reduce the chance of these individuals becoming a UK tax resident. This allows their overseas income to remain outside the UK tax net, which will hopefully encourage those same individuals to stay and help us fight COVID-19.

These changes are time limited, and only support those people whose skill sets are currently required (the full detail around the eligibility and scope of eligible foreign key-workers are still to be announced), but the qualifying criteria will be designed so that the relaxation of the rules is tightly targeted, minimising the risk of abuse.  The duration of this measure will be kept under review as the situation develops.

These unprecedented and extraordinary times are bringing with them extraordinary measures from the UK government in a bid to fight the pandemic and protect the people of the nation.

If you are affected by any of the above or would like any further information please contact Lynn Gracie, Carol Edwards or your usual AAB contact.

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