Home Financials Government extends furlough cut-off and relaxes tax residence rules

Government extends furlough cut-off and relaxes tax residence rules

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The UK government announced new provisions this week for supporting individuals and businesses affected by the ongoing Covid-19 pandemic.

The new measures included an extension to the cut-off date for eligibility under the Coronavirus Job Retention Scheme (CJRS) for furloughed workers and a relaxation of tax residency rules for foreign citizens working in the UK on Covid-19-related activities.

The extension of the CJRS to include workers who were already on company payroll on or before March 19 will enable an additional 200,000 employees to be furloughed and receive eighty per cent of their usual wages under the scheme.  The cut-off date was previously February 28.

The move is widely expected to be beneficial to contractors who were forced to move from working through their own limited company to an umbrella company as a result of the now-postponed Off-Payroll IR35 reforms.

Chancellor of the exchequer Rishi Sunak also called on the Treasury to relax tax residency rules for overseas individuals who are already in the UK working against Covid-19, in a move to retain access to the best international talent at this critical time.  Days spent in the UK may now be disregarded for tax residency purposes, allowing workers to stay in the UK but remain tax resident in their home country.

A spokesperson for HM Revenue & Customs told Recruiter magazine: “In line with the statutory residency test and depending on the facts of an individual case, exceptional circumstances may enable individuals to disregard days spent in the UK, when determining their tax residency.  We have updated our public guidance to provide clarity for customers during this time.”

However, the spokesperson warned, “this is not a ‘blanket ruling’ and should be read in conjunction with existing guidance, and it does not represent a change in the rules or requirements for determining tax residency.  For example, on a case-by-case basis, we have previously applied the same rules in the same way when looking at individuals personally affected by the 2014 Ebola outbreak in West Africa.

“We are keeping the situation under review,” the spokesperson said.

Interpreting the move, Nimesh Shah, a partner at accounting, tax and advisory practice Blick Rothenburg, said: “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”.  Shah said the move was welcome, but should have happened sooner and that the government could have gone further “by introducing a complete tax exemption on earnings for overseas individuals working in the UK in the fight against Covid-19… The government should do everything it can to attract the best talent to the UK”.

17th April 2020.