Coronavirus and tax: now isn’t a time to have to worry about money

HMRC won’t penalise non-residents who might otherwise have to pay UK tax if they get stuck in the country. That’s going to be expensive, says Merryn Somerset Webb. But it is the right thing to do.

There are an awful lot of people it is hard to feel particularly sorry for in this crisis – the odd billionaire who didn’t make it to their island retreat before the borders shut, for example. And my guess is that there will be limited sympathy knocking around for non-UK residents who suddenly find themselves involuntary UK residents. But there should at least be some interest in them, because HMRC is being unexpectedly nice to them.

Non-residents who spend a bit of time in the UK but don’t want to end up having to pay tax here are usually bound by the provisions of the “statutory residence test” (SRT). This determines (via a variety of tests, but with a lot of reliance on the number of days anyone has spent in the UK) whether or not you are a resident for the purposes of a tax year (above 183 days a year you always are, below that and it’s more complicated). Stay too many and it could cost you a fortune.

So what of those non-residents who have been caught here by the rapid spread of travel restrictions brought on by Covid-19? They were worried. They aren’t any more.

HMRC has announced that it will now treat as in “exceptional circumstances” and hence not penalise pretty much anyone who ends up outstaying their usual tax free welcome as a direct result of the great virus crisis (GVC). That (effectively) means everyone gets an extra 60 days’ grace. The idea – according to HMRC at least – was not to in any way change the basic rules, or to create a “blanket ruling” as a final decision “will always depend on the facts and circumstances of each individual case.” However, that’s not how the industry sees it.

HMRC isn’t much in the habit of agreeing to forgo tax revenue thanks to anyone’s exceptional circumstances. And if it does, it likes to do it on an excruciatingly slow case-by-case basis. So this “sweeping blanket approach”, as BDO point out, is “as significant as it is welcome.”

Simon Goldring of McDermott Will and Emery was as impressed. “The Revenue has never done anything like this before,” he told the FT. “I have never seen the Revenue respond so fast to help people.” This, then, is the point – not the non-residents, but the speed at which the Revenue appears to be prepared to move to keep the cash flow show on the road for people – with seemingly no regard to its own income.

There are an awful lot of demands coming in at the moment. Some would like the Isa deadline extended. Others would like the limits on pension savings removed (so that those who have seen their portfolios destroyed can start to rebuild fast). Some would like to see early access to pension assets allowed (again to help out with individual cash flows – this is being discussed in the US too). Others suggest cutting the exit penalty on Lifetime Isas to help the young who have to take money out temporarily to cover cash flow issues.

If HMRC were approaching the UK’s troubles with its usual attitude, none of these things would happen. In a world where we have already been told we don’t have to pay our VAT bills until July, all these things seem possible.

This might all make you feel slightly apprehensive about just how high taxes might go after the coronavirus crisis. That makes sense (and we are nervous). But right now it is also the correct approach. As Christopher Williams, writing in the Sunday Telegraph, this week noted, Kenny Rogers’ The Gambler could have been written for this crisis. Now is no time for worrying about money: “there’ll be time enough for countin’, when the dealin’s done.”

Recommended

Has passive investing created a stockmarket bubble?
Sponsored

Has passive investing created a stockmarket bubble?

Over the past two decades, investors have been switching from buying actively managed investment funds to buying passive funds that simply track a mar…
28 Sep 2021
Why are people panicking about fuel shortages?
UK Economy

Why are people panicking about fuel shortages?

With huge queues forming at petrol stations around the country, Saloni Sardana looks at the reasons behind the fuel shortage and asks how long it's l…
28 Sep 2021
Why investors should beware of corporate waffle
Investment strategy

Why investors should beware of corporate waffle

When top executives try to retreat behind impenetrable jargon, investors should be very sceptical, says John Stepek.
28 Sep 2021
Ensign Group: profiting from US private care
Trading

Ensign Group: profiting from US private care

Nursing and care-home specialist Ensign Group should thrive as Americans age. Matthew Partridge picks the best way to play it.
28 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
What really causes inflation? Here’s what prices since 1970 tell us
Inflation

What really causes inflation? Here’s what prices since 1970 tell us

As UK inflation hits 3.2%, Dominic Frisby compares the cost of living 50 years ago with that of today, and explains how debt drives prices higher.
15 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021