In the latest round of the A Taxpayer v HMRC [2025] EWCA Civ 106 litigation, the Court of Appeal has restored the earlier decision of the First-tier Tribunal (FTT), finding that a non-UK resident taxpayer was entitled to rely on “exceptional circumstances”, stemming from moral obligations to care for a sick relative and her minor children, when applying the Statutory Residence Test (SRT).

What does this mean in practice?

Three main points arise from Nugee LJ’s judgment.

• The FTT has a central role not only in deciding the facts of the case but whether the facts of the case constitute “exceptional circumstances”.
• Taxpayers should always be encouraged to keep detailed records of their activities in the UK since disputes with HMRC (and in particular any FTT hearing) will invariably take place many years after the fact and contemporaneous evidence will be more persuasive than the recollections of the taxpayers and other witnesses.
• Taxpayers should always keep a sensible number of UK days in reserve as a buffer against accidentally becoming UK resident; the issue arose in this case because the taxpayer in question pushed their number of days in the UK to the limit and so, when exceptional circumstances arose, they had to breach their limit of 45 days in the UK.

A brief recap of the FTT and UT decisions

Read our commentary on the 2022 FTT decision in favour of the taxpayer and our commentary on the 2023 Upper Tribunal (UT) decision in favour of HMRC. 

In brief, the Irish resident taxpayer received a substantial dividend in the 2015/16 UK tax year, on which she would only be subject to UK income tax if she was a UK tax resident in that tax year. Under the SRT, the taxpayer would be considered tax resident in the UK if she spent more than 45 days (meaning days in which she was present in the UK at midnight) in the UK during 2015/16. The taxpayer in fact was present in the UK at midnight on 50 days in the 2015/16 tax year. 

The crux of the case was whether six of these 50 days should be disregarded under the SRT’s “exceptional circumstances” exemption. This exemption provides that a day when a taxpayer is present in the UK at midnight should be disregarded if:

• there were circumstances that were exceptional;
• the circumstances were beyond the taxpayer’s control;
• the taxpayer would not be present at the end of the day but for those circumstances;
• the circumstances prevent the taxpayer from leaving the UK; and
• the taxpayer intends to leave the UK as soon as circumstances permit.

The taxpayer’s case was that for six days she had been obliged to come to the UK to care for her twin sister (who was alcoholic and suicidal) and her twin sister’s two minor children (who needed to be looked after). The FTT concluded that “the combination of the need for the Taxpayer to care for her twin sister and, particularly, for her minor children at a time of crisis caused by the twin sister’s alcoholism does constitute exceptional circumstances”. 

HMRC’s case was that exceptional circumstances must be determined according to objective criteria (rather than an individual’s view of their circumstances) and that moral considerations therefore could not constitute exceptional circumstances; instead, only physical or legal considerations should be capable of preventing somebody from leaving the UK. On appeal, HMRC also argued that the FTT were mistaken in looking at the days in question in the round rather than applying the test to each of the six days in question. 

In both hearings, the Court was critical of the taxpayer’s sometimes “vague” recollection of events and lack of record keeping, albeit this did not prevent the FTT from finding her account of the relevant circumstances "convincing".

The Court of Appeal decision

The UT had determined that “prevent” meant “stopping something from happening or making an intended act impossible” and that it is “different from mere hindrance”. Whilst the Court of Appeal agreed that this was a sensible interpretation of what “prevent” should mean, they did not agree that prevent should only apply to physical or legal factors that prevent an individual from leaving the UK. Instead, the Court of Appeal decided that moral obligations or obligations of conscience could, in certain circumstances, be said to prevent somebody from leaving the UK.

The Court of Appeal also declined to categorise potential circumstances (e.g. legal obligations, physical impossibility, medical advice etc.) and opine on whether each were exceptional in the abstract. The Court of Appeal found instead that each case would turn on its own facts.

More fundamentally, the Court of Appeal noted that the phrase “exceptional circumstances” should be given its ordinary meaning and so whether or not a set of circumstances were exceptional was a question of fact for the FTT to decide.¹ This is highly significant because it means that the finding of fact that routinely happens at the stage of a FTT hearing, and is rarely overturned on appeal, will be of paramount importance to future cases involving potentially exceptional circumstances.

Another specific concern raised by HMRC (and accepted by the UT) was that the FTT had not considered whether the exceptional circumstances were satisfied on each day in respect of which the exemption was claimed. However, Nugee LJ noted that “It is true that [the exceptional circumstances test] has to be applied to each day in question. But sometimes it may be quite obvious that it is unnecessary to give separate consideration to each day.”

Having noted this point, he highlighted a key (and sometimes overlooked) part of the exceptional circumstances test, namely that “it will usually be helpful for the FTT to consider what is said to have changed when P does leave the UK as this will, as the UT says, tend to shed light on whether P was until then prevented from leaving by exceptional circumstances.”  Whilst it may be obvious when exceptional circumstances begin, it is rarely as easy to identify when they have come to an end.

[1] This followed the well-established distinction between questions of law and questions of fact in Edwards v Bairstow [1956] AC 14, which determines the extent to which a decision at first instance can be appealed.