Press Room

8 Nov 2023

The Paradox of Tax Planning and Morality: A review of Taxpayer v HMRC – Chimezirim Echendu


In Finance Act 2013, the UK introduced a statutory residence test (SRT) to provide an objective way of determining the residence of individuals. The test, although based substantially on day counting and days spent in the UK, also relies on the substance and quality of an individual’s residence to determine tax residence.

As days spent in the UK remain an important ingredient of the SRT, what amounts to a UK day is also provided by statute. In addition, the statute allows few instances where a day spent in the UK will be disregarded in determining the residence of an individual.

Thus, a person will normally be resident in the UK if they are present in the UK at the end of the day[1]. However, this general rule is not without exceptions, and the legislation in Paragraph 22 of the schedule states two instances where a UK day will be disregarded. The first case is where a person is transiting through the UK, but our discussion here focuses solely on the second case in the legislation, and the tax tribunal’s interpretation of its scope in a recently decided case:

The second case is where:

(a) P would not be present in the UK at the end of that day but for exceptional circumstances beyond P’s control that prevents P from leaving the UK; and

(b) P intends to leave the UK as soon as those circumstances permit.

Examples of circumstances that may be “exceptional” are:

(a) national or local emergencies such as war, civil unrest or natural disasters; and

(b) a sudden or life-threatening illness or injury.


In the Taxpayer v HMRC[2], the taxpayer had moved on 4 April 2015 from the UK to Ireland, and during 2 the tax year that followed (2015-2016) the taxpayer’s husband transferred shares to her on which she received £8 million of dividend income.

In the 2015-2016 tax year, she still satisfied three of the sufficient ties: family, accommodation and 90-day tie, meaning that she would become UK tax resident in 2015-2016 if she spent more than 45 days in the UK.

The taxpayer completed and filed her 2015-2016 self-assessment return on the basis of being non UK resident. However, HMRC opened an enquiry into the tax return and concluded that the taxpayer had exceeded the prescribed number of days under the sufficient ties test and was therefore UK resident.

Available evidence showed that the taxpayer had been in the UK for 50 nights in the 2015-2016 tax year, five more than the prescribed limit under the SRT.

Dissatisfied with the decision of HMRC, the taxpayer appealed to the First Tier Tribunal (FTT).


Before the FTT, the taxpayer’s contention was that she had spent the extra days in the UK because her twin sister, who suffered from alcoholism and depression, had threatened to commit suicide. She argued that this constituted an “exceptional circumstance beyond her control” and that she was prevented from leaving the UK until her sister was “in a place of safety” and appropriate care had been arranged for her sister’s two minor dependent children.

The FTT disagreed with her contention that her sister’s condition was an exceptional circumstance, as there was no medical evidence to substantiate her claim that her sister was suicidal. Further, her sister’s situation was clearly an ongoing issue and did not suddenly begin when she arrived in the UK to visit her.

However, the FTT held that the cumulative effect of her sister’s condition and her consequent inability to look after her minor dependent children constituted an exceptional circumstance. Based on this, the FTT held that the extra days spent in the UK should be disregarded for the purposes of ascertaining her tax residence status.

HMRC subsequently appealed to the Upper Tribunal (UT). The UT allowed HMRC’s appeal ruling that the extra days spent in the UK were UK days and must be counted in determining her tax residence in the tax year because her sister’s circumstance was not exceptional.

Some of the points that stand out from the UT’s analysis of paragraph (4) and (5) of the schedule are:

– the test of what constitutes an exceptional circumstance is objective and cumulative and the fact that the taxpayer was acting reasonably or had a reasonable excuse for exceeding the permitted days was of no merit;

– the test must be satisfied each day the taxpayer spends in the UK and at the end of the day;

– the situation which constitutes an exceptional circumstance must be objective and reasonably verifiable in line with the examples provided by statute;

– a circumstance is not exceptional simply because the taxpayer feels they are;

– an exceptional circumstance does not have to be unique, unprecedented or very rare, but it has to be out of the ordinary course of events, unusual, special, uncommon such as to form an exception to the normal state of things;

– a routine, regular or normally encountered event or circumstance is not exceptional, thus, serious illness and death are themselves not exceptional, neither is it out of the ordinary course, or unusual, or special, or uncommon for a person to feel a moral obligation towards a relative;

– objectively, ordinary and usual scenarios cannot metamorphose into exceptional circumstances because a person feels morally compelled or bound to act in a certain way;

– the exceptional circumstance must also prevent the taxpayer from leaving the UK, it is not sufficient that it merely hinders the taxpayer from travelling. It must have stopped or made it impossible for the taxpayer to leave the UK; and

– if another inhibition, which is not the exceptional circumstance, prevents the taxpayer from leaving the UK, it will not satisfy the test and the day(s) will be counted.

The UT noted the lack of evidence on the part of the taxpayer to substantiate her claim. It was noted that, although she had the intention of claiming that an exceptional circumstance prevented her from leaving the UK, she did not make any effort to keep a detailed record of how she spent her days or why she had concluded on each day that her sister’s condition prevented her from leaving. Neither could she explain in convincing detail and with clarity how she had spent those days in the UK.


Although the UT was of the view that there was nothing special or out of the ordinary with the taxpayer’s circumstances to derogate from the UK days rule, it is arguable that even if the situation was such as to constitute an exceptional circumstance, the lack of evidence to show that the situation persisted each day, and in turn prevented her from leaving the UK, would have led the UT to the same decision. Nonetheless, it is important to note that a taxpayer is not required to provide an itemised timeline for each day, but there must be sufficient evidence to allow a tribunal to make findings on each of the elements of the statutory test for each day.

Thus, a taxpayer who is seeking to rely on the exemption under Paragraph 4 and 5 of Sch 45 FA 2013 must take care to ensure that for every day the claim is made there is evidence of an exceptional circumstance and that it is that circumstance that prevents them from leaving the UK.

If you want to discuss further, please contact Chimezirim Echendu.

[1]  Paragraph 22(1) Sch. 45 FA 2013

[2] HMRC v A Taxpayer [2023] UKUT 182 (TCC) (28 July 2023)

Chimezirim Echendu

Chimezirim holds an LLM in international taxation from King’s College, London. A common law qualified lawyer, he has experience advising clients on both contentious and non-contentious tax matters. He advises clients on residence of companies and individuals, double taxation treaties, and international tax issues in alternative investment funds.

Email: Chimezirim Echendu