Contractors, there's still no certainty for you on Brexit

The build-up was quite monumental, but prime minister Theresa May’s Florence speech offered only a few clues as to what the UK’s departure from the EU will mean for contractors.

Partly this must be put down to the simple fact that Mrs May simply doesn’t know and can’t therefore tell us -- at this stage, writes Graham Palfery-Smith, chair of overseas contractor compliance advisory 6CATS.

Aside from the fact that the UK leaving the single market and that free movement will end after an ‘implementation period’ of about two years, and the usual platitudes about certainty for businesses, there was little to go on in the PM’s speech to predict what will actually happen.

What do we know today?

We know that the EU seeks to punish the UK for having the temerity to have the vote and the result. Their public view is ‘pour encourager les autres,’ in other words they need to make an example of the UK in order to discourage any other states from resisting a greater Europe, or creeping federalism to take another view.

We also know that Mrs May is politically hobbled by her lack of a majority and the virtually constant threat to her leadership. The opposition Labour Party appears confident -- perhaps overconfident --- and its internal divisions over Europe are quite well-hidden. The only certainty then would appear to be uncertainty.

What might happen?

We believe that the negotiations will drag on, with name-calling getting shriller, but eventually there will be a deal of sorts. It will definitely not please everyone but that is inevitable; it has been said that the best deals leave all parties mildly disgruntled and this is probably the best we can hope for.

We still believe that this ‘deal or sorts’ is the likeliest conclusion, despite rhetoric from Brexit minister David Davis, who says Britain is ready to walk away with ‘no deal.’

How do contractors stand to be affected?

UK contractors operating in the UK will likely see no meaningful change, once the nation’s actual exit from the EU has taken place. But those operating across the EU may have to deal with restrictions of some sort. These will likely be flagged up in advance and add levels of administration to areas where none exist now. EU contractors would still be able to work across the EU -- of course, and to work in the UK, they would have to register, certainly during the implementation period and possibly afterwards as well.

But keep in mind; the UK economy cannot manage without labour, at all levels, from outside the UK. Our government urgently needs to address this conundrum.

Presently UK contractors are working across the EU but, in our experience, represent only five per cent of those who are operating internationally. We may see a return of that UK talent diaspora, presently working overseas, coming home; similar to Ireland in the 1990s and China and Africa now. This could take up some of the slack and will offer UK opportunities for some contractors.

What does our Brexit future hold?

What we do believe is going to continue -- even increase -- is the crackdown on non-compliant payment ‘solutions’. A rare area of agreement across the EU, UK and most of the rest of the world is the Common Reporting Standard, which facilitates the sharing of tax data between more than 100 countries.

This means that contractors who focus on maximising their retention, by utilising solutions that do not meet with the requirements of local tax authorities, will be pursued with even greater vigour. Couple this with the introduction since Saturday (September 30th) of the UK Criminal Finances Act, which makes the facilitation of tax evasion, anywhere it is illegal, a criminal offence in the UK, and we expect to see responsible UK employers and recruitment agencies pushing contractors to become compliant, wherever they are working.

In short, we believe there will continue to be opportunities for UK contractors operating overseas, come what may with Brexit, and yes -- exactly how things will work, still nobody definitively knows, but it is certain that compliance will be higher on the agenda than it is now.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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