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Brexit – the impact on Global Mobility from 1st January 2021

After months of negotiations, the UK and European Union came to a withdrawal agreement on Christmas Eve, just before the end of the Brexit transition period on 31st December 2020. The provisional UK-EU Trade and Co-operation Agreement (the Agreement) has now been published in full (subject to approval by the European Commission – expected 1 February), containing new rules for how the UK and EU will live, work and trade together. It is critical that employers understand the new rules, the impact on their internationally mobile employees and any actions required to ensure compliance.

Social security

Existing posted workers, multi-state workers and frontier workers with a cross border link at the end of the transition period should remain under the old EU regulations through grandfathering provisions within the agreement, provided their start date falls before 1st January 2021 and the cross border link continues uninterrupted but this should be considered on an individual basis to confirm the position.

Newly posted employees (i.e. those posted from 1st January 2021) will be subject to the social security provisions set out in the Agreement. These largely replicate the previous EU Social Security Coordination Regulations, ensuring employees are only subject to the social security legislation of one country at a time.

Separate rules will apply to Norway, Iceland, Lichtenstein or Switzerland.

Detached workers

The detached worker rules apply to employees temporarily posted by their employer to work in the UK or an EU territory for a period of up to 24 months and allows for the social security contributions to be paid under the employee’s home social security scheme. However, unlike the EU regulations, there is no scope for an extension of coverage beyond 24 months.

Individual EU member states also can opt out of the detached worker provisions, for the rules to continue to apply they must sign up by 1st February 2021. To date only Hungary, Austria, Portugal and Sweden have signed up to apply the detached worker rules.

Common travel area

The Common Travel Area (CTA) is a historic pre-EU arrangement between the UK, the Crown dependencies (Jersey, Guernsey and the Isle of Man) and Ireland allowing citizens to travel freely between each jurisdiction. CTA citizens have associated rights and privileges (such as the right to work and education) as well as to access social welfare benefits and health services, regardless of which country they reside in. Despite the UK’s departure from the EU, the agreement states that Ireland and the UK may “continue to make arrangements between themselves relating to the movement of persons between their territories”. As such, CTA citizens are not required to take any action to protect their status and rights as a result of Brexit.

UK personal allowance implications for non-residents

Away from social security interaction, the agreement also has implications on the provision of UK personal allowances to EU residents working in the UK.

Previously EU citizens, regardless of their UK residency, will have been entitled to the UK personal allowance (£12,500 for 2020/21). From 1 January 2021, this automatic right falls away and EU nationals should now seek advice as to whether a provision within an individual double tax treaty with the UK, provides for an entitlement to a UK personal allowance.

One notable EU member state whose double tax treaty does not include entitlement to a UK personal allowance is Germany, meaning employees posted from Germany to the UK are now likely to see an increase in their UK income tax.

Should you have any queries on the above, the Global Mobility team would be pleased to assist.

FEATURING: Kayleigh Everson
Kayleigh advises both businesses and private clients on a range of tax matters specialising in residency and domicile, global mobility and general employer compliance. She… read more
FEATURING: Scott Campbell
Scott joined PKF Francis Clark in 2014, he is a chartered tax adviser and tax director in the employer solutions team. He specialises in all… read more
FEATURING: Tamara Beach
Tamara is a tax consultant based in the Truro office. Tamara works with her colleagues across the South West advising on a variety of key… read more
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