Non UK residents who have stayed in the UK during the lockdown, for health or restricted travel reasons, are questioning their offshore position and the impact this could have on individual and company residence.
International travel remains some way off and we wanted to offer a brief overview of the potential impact.
Here are some FAQs which may offer some light into the ongoing situation.
FAQs - Offshore tax structures and Covid-19
‘Does HMRC regard the impact of COVID 19 as ‘exceptional’ in relation to UK residence and the number of days spent in the UK?’
HMRC has outlined that the following situations will be considered as exceptional:
If you have been or are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
If you find yourself advised by official Government advice not to travel from the UK as a result of the virus
If you are unable to leave the UK as a result of the closure of international borders, or
If you are asked by your employer to return to the UK temporarily as a result of the virus
‘Does my Jersey company run the risk of becoming UK tax resident?’
HMRC have stated: “We do not consider that a company will necessarily become resident in the UK because a few board meetings are held here, or because some decisions are taken in the UK over a short period of time. HMRC guidance makes it clear that we will take a holistic view of the facts and circumstances of each case."
HMRC considers that a non-resident company will not have a UK fixed place of business permanent establishment after a short period of time, as a degree of permanence is required.
This is welcome news to the offshore world that HMRC are taking a reasonable approach with helpful guidance.
Of course non-UK resident companies must not be complacent and should continue to minimise their UK presence wherever possible in the current environment.
‘Is my Jersey company going to fall foul of the Jersey economic substance rules?’
Many Jersey companies will be concerned whether any restrictions could have an impact on their ability to pass the economic substance test.
Revenue Jersey has issued a statement that will provide comfort to those with concerns, they have said:
“Where companies operating practices have to be adjusted to compensate for the Coronavirus outbreak, the Comptroller will not determine … that a company has failed the economic substance test. For example, a Company would normally hold directors’ meetings in Jersey but, to avoid travel or because individuals are self-isolating, these meetings are temporarily held virtually to allow those individuals – or alternatives - to attend. The Comptroller would not regard this as failing to meet the economic substance test. Companies still need to ensure that all meetings continue to be held in accordance with the company articles. Changes to governance arrangements may be required to allow additional flexibility during this difficult period."
This is based upon our current understanding of HMRC practice as at 3rd June 2020 and is subject to change.
If you would like to discuss any of the issues mentioned above in more detail with us, please do contact Hannah Roynon-Jones, Associate Director in the first instance.