The Brexit deals facing Britons contracting in the EU post-January 31
Although the Brexit date of January 31st 2020 – this Friday -- has now been finalised, approved by the UK Parliament and received Royal Assent, there is still no certainty about what the UK’s future relationship with the EU will look like and, specifically, what that will mean for British contractors working in the EU and vice versa, writes Nik Papageorgiou of Access Financial.
However, an important milestone has been reached.
The Brexit progress so far
This is the abolishment of the backstop, the hard border between Northern Ireland and the Republic of Ireland after Brexit. The whole of the UK will leave the EU customs union, which is an agreement between EU countries not to charge taxes (‘tariffs’) on things coming from other EU countries, and to charge the same tariffs as on things coming from outside the EU.
Leaving the customs union means the UK will be able to strike trade deals with other countries in the future.
Legally, there will be a customs border between Northern Ireland (which stays in the UK) and the Republic of Ireland (which stays in the EU), but in practice things won't be checked on that border.
'Points of entry' & 'at risk'
The actual checks will be on what is effectively a customs border between Great Britain and the island of Ireland, with goods being checked at "points of entry" into Northern Ireland.
Taxes will only have to be paid on goods being moved from Great Britain to Northern Ireland if those products are considered "at risk" of then being transported into the Republic of Ireland.
A joint committee made up of UK and EU representatives will decide at a later date what goods are considered "at risk".
Now we are left with two scenarios which are likely to play out in the coming weeks and months. The two most likely outcomes as things stand now are:
1. No-deal Brexit
In this case, there is no social security cover for UK nationals in the EU and vice-versa, plus the free movement of people is no longer valid. Work permits of some sort will be needed after December 31st 2020, when the transition period comes to an end.
2. Brexit with a deal
In this case, there is now social security cover for UK nationals in the EU and vice-versa, but based on recent declarations, free movement of people will end. Work permits of some sort will be needed after December 31st 2020, but they will probably be less-demanding than in a ‘no deal’ scenario.
In all cases, taxes imposed on UK nationals working in the EU and vice versa, depend only on bilateral agreements that are not EU-wide. The table below summarises the possibilities and the likely impact of each on the tax, social security and right to work status of British contractors in the EU and vice versa.
|TAX||SOCIAL SECURITY||RIGHT TO WORK|
|BREXIT-NO DEAL||Not affected*||NO A1s, no EU-wide cover**||NO right to work|
|BREXIT-DEAL||Not affected*||NO A1s, no EU-wide cover**||NO right to work|
* Tax is subject to bilateral agreements, so it is not affected by the EU-UK future relationship
** This form (CA3821 and CA3822 for directors of limited companies) will enable HMRC to determine which member state’s social security legislation applies
What’s the most likely Brexit outcome for UK contractors?
Despite continuing uncertainty, the Immigration (European Economic Area) Regulations 2016, which currently implement free movement in UK law, will be repealed.
This will likely mean that British contractors will be treated the same as workers from all other countries when seeking the right to work in the EU, and vice versa.
This would be a disadvantage, but it should be remembered that, despite the advantage of freedom of movement, many more non-EU migrants come to the UK than EU migrants. So, although work permits are a burden, they are not an insurmountable one. The most advantageous outcome for British contractors working in the EU, and vice versa, would be the retention of freedom of movement, although this currently looks politically impossible.
The new deal must be signed off by the end of 2020, when the transition period ends officially. As Boris Johnson has ruled out any extension of the transition period, if there is no new trade deal and no agreement on the right to work of Britons in the EU and EU nationals in the UK, then things will be complicated in 2021-- but this should become clearer later in 2020 and we will update ContractorUK readers as soon as that clarity emerges.