Matthew Greene and associate barrister Guy Bud review the recent decision in A Taxpayer v HMRC [2025] EWCA Civ 106 which will particularly interest those for whom an unexpected adverse event means that they spend longer than originally anticipated in the UK.

Many people spend time in more than one country every year. This is particularly true for internationally mobile high-net-worth individuals who are resident in other jurisdictions and also spend time in the UK. This carries the risk of becoming tax resident unintentionally if an unexpected event means that they spend longer than originally anticipated in the UK.

Back in 2023, the application of the “exceptional circumstances” provision in the statutory residence test was addressed by the Upper Tribunal in HMRC v A Taxpayer [2023] UKUT 182 (TCC), which took an extremely prescriptive approach to the statutory wording. Our view at the time was that the results seemed “somewhat harsh”, especially given the sad facts of the case. The taxpayer appealed.

The new decision by the Court of Appeal has now injected some much-needed balance. It has set out guidance that will be particularly welcome for many foreign-resident individuals confronted with similar adverse circumstances.

Background

Tax residence is a key concept. A person who is not tax resident in the UK is generally not liable for UK taxation on foreign income and gains. It is determined by reference to a “statutory residence test” introduced in Schedule 45 of the Finance Act 2013. In many cases, an individual’s residence will turn simply on the number of days spent in the UK.

Paragraph 22(4) recognises the potential for unfairness and allows days to be disregarded in “exemptional circumstances”. It covers circumstances where:

• the person would not be present in the UK at the end of that day but for exceptional circumstances beyond that person’s control that prevent them from leaving the UK, and
• the person intended to leave the UK as soon as those circumstances permitted.

Examples given in paragraph 22(5) include sudden or life-threatening illness or injury. The number of days that may be claimed is “capped” at 60 in any given tax year.

The taxpayer in this case moved from the UK to Ireland. Her sister, living in the UK, suffered from severe alcoholism and depression, which seemed to be getting worse at a “sudden and alarming rate” affecting her ability to care for her children. The taxpayer travelled three times to the UK to ensure her sister was safe and make appropriate arrangements to care for her nieces. It was agreed that the taxpayer had been in the UK for 50 days during the 2015/16 tax year. This meant she would be UK-resident and taxable on her worldwide income and gains unless six or more of these days could be disregarded for “exceptional circumstances”.

The litigation

The First-Tier Tribunal (“FTT”) accepted the taxpayer’s argument that the circumstances were exceptional. Although it thought there was insufficient evidence that the taxpayer’s sister had been at a heightened risk of suicide, it accepted the argument that the taxpayer’s moral duty to put in place suitable care arrangements for her nieces meant there were exceptional circumstances.

The Upper Tribunal (“UT”) rejected this rationale, focusing on the statutory wording. It found that the test was objective in nature and did not turn on the taxpayer’s subjective intentions. Death and serious illness are commonplace and cannot be “exceptional”. Moreover, the taxpayer must have been “prevented” from leaving the UK. This meant the taxpayer’s departure must have been rendered impossible, not simply more difficult. Most startlingly, this restrictive definition meant that “moral obligations” could never “prevent” the taxpayer’s departure.

The Court of Appeal overturned the UT and reinstated the FTT’s original judgment in the taxpayer’s favour. Lord Justice Nugee gave judgment for a unanimous court.

On the first key issue, the Court of Appeal agreed that something that “prevented” a person from leaving was clearly intended to set a high standard. It disagreed with the UT that it should be limited to “certain defined categories” of objective legal or practical obstacles that made departure an impossibility. As the court explained, “we also usually have no difficulty in distinguishing between a person being obliged to do something and merely choosing to do so.” Nothing in principle would disqualify a “compelling moral obligation or obligation of conscience”.

The court provided helpful guidance for taxpayers, saying:

“The FTT is ultimately required, having found the primary facts, to make an assessment whether the circumstances prevented [the taxpayer] from leaving the UK. That to my mind requires them to identify whether the circumstances were objectively compelling such as to prevent [the taxpayer] from leaving. Those circumstances can include the reaction of [the taxpayer] to such matters as the illness of a close relative, and other moral obligations operating on [the taxpayer] in the circumstances, but the assessment whether such circumstances are really sufficiently cogent to amount to prevention is a value-judgement for the FTT, and can take into account such matters as whether [the taxpayer]’s reaction is reasonable and in accordance with ordinary societal expectations, or is unreasonable and idiosyncratic.”

On the second key issue of what circumstances could be truly exceptional, the court considered that this was a question of fact and, therefore, for the FTT to determine based on the evidence before it.

Implications

A key take-home point from the case is the importance of gathering and presenting factual evidence as strongly as possible. The circumstances must be shown to apply for every individual day. Given the nature of the issues, this may be harder than it sounds, especially where the information is personal, sensitive or relates to third parties who may be cautious about divulging it. All the same, gathering as much supporting evidence and presenting it as forcefully as possible will become crucial.

The Court of Appeal decision in A Taxpayer restores some much-needed balance. It makes it clear that “exceptional circumstances” represent a high bar but not an impossible one. It will doubtless be welcomed by taxpayers and their professional advisors to restore common sense to the residence test.

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