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Government announces temporary relaxation of UK’s tax residency rules for overseas workers helping with COVID-19

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, says Nimesh Shah.

In an open letter to the Treasury, the Chancellor, Rishi Sunak has said that 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.

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.

It is a 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. Because of 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.

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 1 March and 1 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.

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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If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or Nimesh Shah.

You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest updates and insights.