Expats and non-doms need to look closely at their residency status and repatriation in light of COVID-19's dislocating grip. There is only so much that falls under HMRC's "exceptional circumstances" rules. Here is what some experts are warning to watch out for.

Non-residents are being struck on several fronts because of COVID-19, leaving those stranded by the outbreak, among other services groups, facing heavy tax penalties because of residency over-stays, the UK accountancy firm UHY Hacker Young has highlighted. Returning expats face similar tax dilemmas.

Depending on circumstances, non-residents can spend between 16 and 183 days in the UK before they are hit by UK taxes. Visitors who stay over 183 days are considered a UK resident. Current HMRC rules give non-residents a 60-day grace period for exceptional circumstances; which may include births, deaths, and sudden life-threatening illness or injury arising during the tax year. The accountancy firm warned that residents must keep track of their day counts, and expect penalties.

“Overstaying by just one day could result in HMRC reviewing the income a non-dom has made overseas for the whole tax year and then charging UK tax on that. Needless to say, that tax rate will be a lot more than they are used to,” Neela Chauhan, partner at UHY Hacker Young, said.

Chris Groves, a partner at Withers law firm, said he expects HMRC will take a relaxed view on interpreting exceptional circumstances in such times. “I suspect anyone who is trapped in the UK, even if it is not by a policeman standing outside their door, but because they are sick and self isolating, or trapped by social distancing, will be allowed those days as exceptional and not counted towards their day counts.”

More difficulty stems from the fact that the crisis has come at the end of the tax year when residents have already used up most of their allocated dates and are now suddenly stuck in the UK, "with very little they can do about it," in Groves view.

Even with confirmation from HMRC that exceptional circumstances will extend to those in quarantine, those advised by the government not to travel, those who cannot leave because borders are closed, and those being asked by employers to return to the UK, Groves said it won't include those who simply don’t feel safe travelling now, even it they can. Also 60 days extra residency doesn't fit with how long communities are forecasting it will take to get the spread of the virus under control.

Further, tax disruptions are likely to hit residents on the number of work days they are permitted in the UK. For some residents that means no more than 40 days in a year, and there is currently no provision to add more as exceptional days. “The exceptional days allows you to spend more time here but it doesn’t allow you to work for any extra days," Groves said. People may be stuck in the UK but "can’t work without making themselves resident and that will tip them over the threshold.”

The travel shutdown is also affecting those who are currently in the UK but not classed as having a home here. "If you are now stuck in the UK with a family member and spent more than 16 nights with that person, that counts as a home and may restrict the number of days you can spend in the UK in the first place -- all without triggering the exceptional days test." Groves said the same goes for families caught stranded coming to pick up their children from UK schools, which also tips them into residency status without any allowance for exceptional days.

Although HMRC has reacted quickly to frontline businesses and employers immediately thrown into turmoil, Groves said, "I don’t think there will be a lot of people focusing on the needs of a very limited number of extremely wealthy individuals, so it is unlikely we are going to get much clarity in the short term.”

But it does create a level of uncertainty for people in that position, he said. Most clients the firm has spoken to have managed to get back to where they needed to be. At the same time, it is a test for some families. “If it is important for you to be in the UK in times like this, then perhaps you should think about being resident here,” Groves suggested.

For workers forced to go home early, the tax consequences could also be significant. Under temporary non-residency rules, if expats don’t spend more than five years out of the country, any gains on their worldwide earnings are going to be taxable in the year they return. “Other than maintaining non-residency, it is difficult to do anything about it,” he said.

Asked whether queries are picking up about changing residency or taking offshore business elsewhere in response to the outbreak, he said it was "a bit too early for that”, but was something to watch. “At times like this, places like Singapore seem to be able to operate more easily than places like the UK," and there may be a sense of comfort that comes from that additional controlling element," he added.

Also smaller jurisdictions might look more favourable, having the option to close borders and hunker down in a way that big countries generally can't. “The more freedom you have the harder it is to organise,” he said, but cautioned that a whole mix of decisions determine where to operate from and should be proportional. “This looks like a one-in-a-hundred-year thing. So you can spend a lot of time planning for something that might not ever happen again in your lifetime."

With travel bans, cancelled flights and quarantine in wide operation, firms are setting up daily guidance on the knock-on effects to immigration compliance and visas for all sectors. Immigration specialist Lewis Silkin is one of those updating information daily on tasks such as onboarding new hires remotely, making sure sponsorship duties are met and managing visa applications already in the pipeline, as well as trying to pre-empt guidance coming from the Home Office.