Double-Taxation for UK expatriates?
Brexit and Social Security
1. What would happen with the EU & UK workers social security contributions if the UK leaves the EU with no deal?
2. Are businesses and workers ready for double taxation systems?
3. How would employers attract skilled workers to relocate between the UK and the EU?
This week our focus is on Social Security contributions. International employers are facing their worst nightmare – which is an increase in spending with little or no returns on investment from the EU States.
With the October 2019 deadline ahead of the UK population, we want to know how HMRC can support businesses in terms of double taxation. Thus far, the HMRC has confirmed that should the UK leave the EU without a deal in October:
- Employers may need to make social security contributions in the UK and one or more EU or EEA countries (including Switzerland) at the same time.
Two years later, the UK Government is working tirelessly to protect UK nationals in the EU in a ‘no deal’ situation by reaching reciprocal arrangements with the EU or member states. The aim is to support the existing social security coordination for an interim period until 31 December 2020. We estimate that this process might take six or more months after the December 2020 expiration date for the UK employers to implement the remaining 25 EU countries arrangements. The government plan is that individuals will pay social security contributions in one country at a time.
Other deliberation points not only from the UK’s point of view but also the 25 remaining Countries standpoints include; how the expatriate rules and regulations might look, how would the ‘split year’ treatment, multi-states workers, the rotational workers, foreign tax credit relief to name but few primary processes – might look and feels like after a ‘no deal’?
The government states that if an employee is currently working in the EU, the EEA or Switzerland and has a UK-issued A1/E101 form which proves they are paying UK National Insurance contributions, they will continue to pay them for the length of the period shown on the document. Employers must note that if the end date on the form goes beyond the day, the UK leaves the EU; employers should contact the hosting country’s social security institution.
Aforementioned, it is an additional administrative cost for businesses as they might need a translator and an in-country administrator solely for social security transactions. As we all know international tax management can be laborious. It is advisable that global mobility and payroll specialists start engaging with their in-country counterparts if they haven’t done so, to mitigate associated cost, penalties and fees from EU social security offices.
In the case of Irish and UK nationals, they are protected under the international agreement signed by the UK and Ireland in February 2019. Thus, no action is required. A replacement for the A1/E101 form will be issued for new applications after the UK leaves the EU. However, the form CA3822 will still be valid.