Court of Appeal loosens ‘exceptional circumstances’ test
The Court of Appeal has allowed an appeal and restored the decision of the First-tier Tribunal (Tax Chamber) in A Taxpayer v HMRC [2025] EWCA Civ 106. The appeal is the first to consider the statutory residence test, introduced with effect from 6 April 2013. The concept of ‘days’ spent in the UK lies at the heart of the test. Ordinarily, every day when a person (P) is present in the UK at midnight at the end of the day counts for the purposes of the test. This appeal concerned the following exception to that rule contained in para 22(4) of Schedule 45 to the FA 2013:
(4) 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 prevent P from leaving the UK, and
(b) P intends to leave the UK as soon as those circumstances permit.
The appellant had moved to Ireland. She claimed that six days when she was in the UK in December 2015 and February 2016 fell within para 22(4), on the basis that her twin sister was at risk of committing suicide. The FTT rejected that case but found that there were exceptional circumstances caused by the twin sister’s alcoholism and depression and the appellant’s need to care for her sister’s minor children. It found that the appellant was prevented from leaving the UK because of the need to care for the sister and her children.
HMRC succeeded on appeal before the Upper Tribunal ([2023] UKUT 00182 (TCC)). The UT found that the FTT’s decision on whether there were exceptional circumstances was internally inconsistent and that there were no exceptional circumstances in this case (the illnesses of alcoholism and depression being not uncommon). Further, and of general application, it found that a person could not be ‘prevented’ from leaving the UK merely because he or she considered that they had a moral or conscientious obligation to stay in the UK. It found that only physical or legal obligations to be in the UK could satisfy the requirements that the exceptional circumstances must prevent the person from leaving the UK.
The Court of Appeal has restored the decision of the FTT. On the issue of whether there were exceptional circumstances, Nugee LJ (with whom Males and Falk LJJ agreed), concluded that the FTT’s decision was not internally inconsistent and one that it was entitled to reach – the question of whether there are exceptional circumstances being an issue of fact to be decided by the FTT. He also concluded that the FTT had been entitled on the evidence to find that the statutory test was satisfied on each day notwithstanding that the appellant was unable to provide evidence of what she was doing on each day in the UK. He observed that it will generally be relevant to ask what changed between the day that a person did leave the UK and the day before, when they say they were prevented from leaving ([102]).
Of broader application is what the Court said on the ‘prevent’ element of the test. Nugee LJ agreed with the UT that the word ‘prevent’ is stronger than ‘hinder’ and its sense is to refer to stopping something from happening or making it impossible, rather than just making it more difficult. However, he found that there was no warrant in the statutory wording to limit the inhibitions that might prevent someone from leaving the UK to legal or physical inhibitions. Therefore, it is now open to a taxpayer to assert that they were prevented from leaving the UK if, because of the exceptional circumstances, they needed to stay in the UK. Although the Court has removed any limit on the types of inhibitions that can be relied upon, its judgment emphasises that it is a high threshold to establish that the test is met. For example, at [49], Nugee LJ contemplated that the taxpayer will be able to say that he “had no real choice in the matter and was in practical terms obliged to stay”; and at [53] he said that the FTT can be expected to scrutinise whether the circumstances “really prevented P from leaving” and referred to the circumstances being “truly compelling”.
The judgment gives rise to the prospect of further litigation on other appeals before the FTT. It may be some time before advisers can be confident to advise on the factual circumstances that will be found by the FTT to fall within the exception.
Christopher Stone KC and Sam Way represented HMRC in the FTT, UT and Court of Appeal.
Back to News
