Payment of contributions for mobile employees post-Brexit
A welcome measure of clarity, but some questions remain.
The UK government has recently published a number of updates on the international social security arrangements that will apply for individuals moving between the UK and the European Union (EU) after Brexit. These updates include the UK authority’s view of the rules which determine where individuals and their employers should make contributions when working temporarily outside their home countries.
At present, the social security position of individuals exercising their right to freedom of movement within the EU (including the European Economic Area and Switzerland) is determined in accordance with European Social Security Coordination Regulations. These stipulate where social security contributions should be paid, and they also protect the individual’s entitlement to social security benefits, such as pensions and health care.
In the event that the UK leaves the EU with a deal, it is anticipated that these rules will continue to apply until 31 December 2020, but in the event of a no-deal Brexit, the existing arrangements may end immediately. This creates a great deal of uncertainty, both for employers concerned about compliance risk and for employees concerned about loss of benefits. The UK government’s recent announcements therefore provide a welcome measure of clarity in some key areas, while leaving some open questions still to be resolved.
The government has indicated that existing A1 certificates issued by the UK authority (which confirm an individual’s liability to pay UK NICs while working temporarily elsewhere in Europe) will remain valid until the end date recorded on the certificate. The government recommends that employers check with the overseas authorities in the EU country where their employees are working to ascertain whether contributions may also become due there – if, for example, that country no longer recognises the validity of the A1.
The government has advised that for new assignments from the UK to an EU country after Brexit, applications to continue to pay UK NICs should continue to be made on the same form as at present. A replacement for the A1 certificate is under development.
The only country where the situation will be entirely ‘business as usual’ is Ireland, as the UK and Ireland recently entered into a new bilateral agreement on very similar terms to the EU regulations, to apply from the date of Brexit.
For inbounds from the EU to the UK, there is much less clarity on the UK authority’s position. The recent guidance suggests that EU nationals who work wholly or mainly in the EU and who work on a limited basis in the UK will not have to pay UK NICs if certain conditions are met. (To add to the confusion, the conditions themselves will be published only after Brexit has occurred.)
Comment: The UK government’s position risks the imposition of dual liabilities for those employees who are working in the EU and are covered by a UK A1 at the date of Brexit. It will be for each EU country to decide the stance it will take vis-à-vis the UK going forward, so an employer’s risk of encountering this situation is likely to differ depending on the EU countries in which the business operates.
HMRC has started to issue letters to A1 applicants advising them that their A1 remains valid post Brexit until the end date on the certificate, that NICs will continue to be due, and that they should contact the host country social security authorities to find out if contributions will be due in that location also. It is clearly not optimal to transfer this responsibility from government to business, and relatively few countries’ social security authorities appear to have a definitive position on their approach post-Brexit, so employers are unlikely to gain much certainty from this exercise. HMRC’s approach could result in increased costs and administrative burden for companies with mobile employees in Europe.
While clarity on the process for A1 applications post-Brexit is welcome, it is not clear on what basis the UK will process the applications it receives. The UK has essentially transposed the EU coordination regulations into UK law, and has asked EU countries to continue to apply these regulations until at least 31 December 2020, even if there is a no-deal Brexit. However, as noted previously, it will be for each EU member state to decide whether to do so, and there are indications that some are not willing.
Kathryn Harding & Laura Hutton, KPMG (KPMG’s Tax Matters Digest)
Home >Articles > Payment of contributions for mobile employees post-Brexit
Payment of contributions for mobile employees post-Brexit
A welcome measure of clarity, but some questions remain.
The UK government has recently published a number of updates on the international social security arrangements that will apply for individuals moving between the UK and the European Union (EU) after Brexit. These updates include the UK authority’s view of the rules which determine where individuals and their employers should make contributions when working temporarily outside their home countries.
At present, the social security position of individuals exercising their right to freedom of movement within the EU (including the European Economic Area and Switzerland) is determined in accordance with European Social Security Coordination Regulations. These stipulate where social security contributions should be paid, and they also protect the individual’s entitlement to social security benefits, such as pensions and health care.
In the event that the UK leaves the EU with a deal, it is anticipated that these rules will continue to apply until 31 December 2020, but in the event of a no-deal Brexit, the existing arrangements may end immediately. This creates a great deal of uncertainty, both for employers concerned about compliance risk and for employees concerned about loss of benefits. The UK government’s recent announcements therefore provide a welcome measure of clarity in some key areas, while leaving some open questions still to be resolved.
The government has indicated that existing A1 certificates issued by the UK authority (which confirm an individual’s liability to pay UK NICs while working temporarily elsewhere in Europe) will remain valid until the end date recorded on the certificate. The government recommends that employers check with the overseas authorities in the EU country where their employees are working to ascertain whether contributions may also become due there – if, for example, that country no longer recognises the validity of the A1.
The government has advised that for new assignments from the UK to an EU country after Brexit, applications to continue to pay UK NICs should continue to be made on the same form as at present. A replacement for the A1 certificate is under development.
The only country where the situation will be entirely ‘business as usual’ is Ireland, as the UK and Ireland recently entered into a new bilateral agreement on very similar terms to the EU regulations, to apply from the date of Brexit.
For inbounds from the EU to the UK, there is much less clarity on the UK authority’s position. The recent guidance suggests that EU nationals who work wholly or mainly in the EU and who work on a limited basis in the UK will not have to pay UK NICs if certain conditions are met. (To add to the confusion, the conditions themselves will be published only after Brexit has occurred.)
Comment: The UK government’s position risks the imposition of dual liabilities for those employees who are working in the EU and are covered by a UK A1 at the date of Brexit. It will be for each EU country to decide the stance it will take vis-à-vis the UK going forward, so an employer’s risk of encountering this situation is likely to differ depending on the EU countries in which the business operates.
HMRC has started to issue letters to A1 applicants advising them that their A1 remains valid post Brexit until the end date on the certificate, that NICs will continue to be due, and that they should contact the host country social security authorities to find out if contributions will be due in that location also. It is clearly not optimal to transfer this responsibility from government to business, and relatively few countries’ social security authorities appear to have a definitive position on their approach post-Brexit, so employers are unlikely to gain much certainty from this exercise. HMRC’s approach could result in increased costs and administrative burden for companies with mobile employees in Europe.
While clarity on the process for A1 applications post-Brexit is welcome, it is not clear on what basis the UK will process the applications it receives. The UK has essentially transposed the EU coordination regulations into UK law, and has asked EU countries to continue to apply these regulations until at least 31 December 2020, even if there is a no-deal Brexit. However, as noted previously, it will be for each EU member state to decide whether to do so, and there are indications that some are not willing.
Kathryn Harding & Laura Hutton, KPMG (KPMG’s Tax Matters Digest)
