Workforce planning for 2021
As we approach the end of the transition period post-Brexit, employers with globally mobile employees will naturally be concerned about what happens next in respect of their employees’ tax liabilities, social security status and healthcare rights.
When the UK left the EU on 31 January 2020, the ‘Withdrawal Agreement’ governing departure set an 11-month transition phase to negotiate a detailed UK-EU trade deal going forward. The transition period ends on 31 December 2020 and the deadline for extending it has now passed. Negotiations on the trade deal are still ongoing, with many items remaining unclear.
The good news is that Brexit should have no impact on an individual’s personal tax liabilities. Liability to tax is governed by double tax agreements, agreed individually between the UK and the other party, and these have never been subject to EU rules.
UK legislation originally determined the eligibility of non-UK residents to the tax-free Personal Allowance (PA) by whether or not they were EU nationals. This would have produced a rather quirky situation of non-UK resident EU citizens having the benefit of the PA while non-UK resident UK citizens did not. However, the legislation has now been amended to ensure non-UK resident UK nationals are eligible for the PA.
Social Security – workers currently working abroad
Another bit of welcome news is that HMRC has confirmed that it considers workers currently posted to another EU location to be protected by the Withdrawal Agreement. The Withdrawal Agreement states that individuals “shall be covered for as long as they continue without interruption to be in one of the situations…. involving both a Member State and the United Kingdom”.
What this effectively means is that a posted worker with a valid A1 certificate who remains on their posting should continue to covered by that A1, i.e. social security will remain payable in the home country and not the host country. We would also expect multi-state workers with valid A1’s to be protected. However, the European Commission has recently confirmed the EC Regulations 883/2004 will not apply in the event of no agreement being reached from 1 January 2021 for workers posted from the UK to provide services in an EU member state. Therefore, while HMRC has been positive about the Withdrawal Agreement covering posted workers who started their posting pre 1 January 2021, it is less clear if the EU Commission and/or individual EU states will be in agreement.
Read more on the Social Security rules from 2021.
Employers who have EU, EEA or Swiss citizens on their staff should encourage them to apply for pre-settled or settled status by the deadline (30 June 2021). If you will be transferring EU, EEA or Swiss citizens to the UK in the near future, this should be done by 31 December 2020 if at all possible so that they qualify for the EU Settlement Scheme and can then apply.
The Government has now published further details for the ‘points based’ immigration system the UK will use from 2021 – read more.
Employees will also be anxious about their access to healthcare going forward. The two current EU schemes are the European Health Insurance Card (EHIC) and the S1 reciprocal schemes. The EHIC provides access to healthcare services across the EU for a period of fewer than three months. The S1 scheme allows individuals to receive ongoing health and social care in another country. Services received are at the cost of the home country.
Besides the obvious personal impact, loss of or reduced access to healthcare will inevitably have a cost implication for employers and employees as requirements increase to purchase travel and/or health insurance.