Statutory Residence Test: Redefining ‘Exceptional Circumstances’

Redefining ‘Exceptional Circumstances’: A Human-Centric Approach to the Statutory Residence Test (SRT)

The case of ‘A Taxpayer v HMRC [2025]’ is a significant decision by the Court of Appeal redefining the interpretation of ‘exceptional circumstances’ for the purposes of the UK’s Statutory Residence Test (SRT), and rules that a sufficiently compelling moral obligation can amount to an exceptional circumstance.

The taxpayer, who had moved to Ireland, submitted her tax return on the basis that she was a non-UK resident for the 2015/16 tax year, during which she had received circa £8million of dividends. However, she had been present for 50 ‘midnights’ in the UK during the tax year, exceeding the 45-day threshold to be classified as non-UK tax resident based on the number of sufficient ties.

However, she sought to exclude six of these days under the “exceptional circumstances” provision of the SRT, which allows a taxpayer to disregard days for the purposes of the SRT where:

1. The individual is present in the UK at midnight due to exceptional circumstances beyond their control.
2. These circumstances prevent them from leaving the UK; and
3. They intend to leave the UK as soon as the circumstances permit.

The taxpayer argued that her presence in the UK for the last 6 of the days (2 in December 2015 and 4 in February 2016) was that she was morally and practically compelled to remain in the UK to help her twin sister who was suffering from alcoholism, was suicidal and was failing to look after her own children.

HMRC disagreed with the taxpayer’s interpretation. Initially The first-tier tribunal had ruled in favour of the taxpayer, accepting that she had a sufficient moral obligation that prevented her from leaving the UK. However, the Upper tribunal had reversed the decision on the basis that taxpayer’s circumstances were not “exceptional” and did not meet the criteria for disregarding the days. It interpreted the provision narrowly, focusing on physical or legal impediments to leaving the UK.

The Court of Appeal overturned the decision and agreed with the decision of the first-tier tribunal. The court held that the term “exceptional circumstances” should not be limited to a physical or legal barrier but instead can be broadly interpreted to encompass a moral obligation, provided that the situation was genuinely compelling and beyond her control.

This ruling redefines the interpretation of what classifies as “exceptional circumstances” in the SRT, loosening what has until recently been a fairly rigid test, and restores a degree of common sense and pragmatism to the SRT, which is most welcomed.

Disclaimer - All information in this post was correct at time of writing.