The First-tier Tribunal (FTT) has upheld a taxpayer's appeal against a decision by HM Revenue...
The First-tier Tribunal (FTT) has upheld a taxpayer's appeal against a decision by HM Revenue and Customs (HMRC) that he was resident in the UK in the 2019/20 tax year, finding that 'transit days' and an extra day he spent in the UK after his flight was cancelled did not count for the purposes of the Statutory Residence Test (SRT).
The taxpayer was a chartered engineer who worked overseas. On 8 and 17 February 2020, he had flown into Heathrow Airport and spent the night at a nearby hotel before flying out the next day. On 28 February he had again flown into Heathrow, but his flight out on 29 February had been cancelled after Dublin Airport closed due to Storm Jorge, and he had flown to Dublin on a rescheduled flight with the same airline on 1 March. He had returned to the UK again on 30 March, after the government instructed all UK citizens to return to the UK following the start of the first COVID-19 lockdown.
He had stated on his self-assessment return for the 2019/20 tax year that he was not UK resident based on the SRT. HMRC enquired into the return and issued a closure notice assessing him to tax of £64,946 on the basis that he had been UK resident. He appealed the notice to the FTT.
It was common ground that he had been present in the UK at the end of the day on 100 days in the tax year. He would be UK resident if 91 or more of those days counted for SRT purposes. HMRC accepted that the days from 30 March to 5 April did not count as they were due to COVID-19, but disputed his assertion that 8, 17 and 28 February fell within the 'transit exception' in Paragraph 22(3) of Schedule 45 to the Finance Act 2013, and that 29 February fell within the exceptional circumstances exception in Paragraph 22(4).
The FTT rejected HMRC's argument that, because his journeys had been at an end when he arrived in the UK, he had not 'arrived as a passenger' within the meaning of Paragraph 22(3). Even if the UK was his final destination and he was no longer being 'conveyed' from one place to another after he arrived, he would still have been conveyed to the UK and would therefore have arrived as a passenger.
While in the UK he had not travelled to central London, returned to his family home or undertaken any activity that could be characterised as an end in itself. The hotel accommodation, meals taken there or at Heathrow Airport, and travel between the hotel and the terminal were all functionally connected to onward international travel. The FTT found that he had met the transit exception for 8 and 17 February and, subject to the cancellation of his flight being an exceptional circumstance, 28 February.
The FTT found that flight cancellations were uncommon and only a subset of those cancellations were due to adverse weather conditions. HMRC argued that he had not intended to leave the UK as soon as circumstances permitted because he had not tried to secure an alternative flight to Dublin, or a flight or alternative means of transport to any other non-UK destination, on 29 February. However, the FTT considered that the question should be approached by reference to practical reality rather than abstract possibility. In the circumstances, his acceptance of the arrangements offered to him by the airline, and his departure on the rebooked flight the following day, constituted leaving the UK as soon as circumstances permitted. Therefore, 29 February fell within the exceptional circumstances exception. He had thus spent 89 days in the UK for SRT purposes in the 2019/20 tax year and was not UK resident for that year.