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Brexit and international social security

Businesses have so much to think about and with such scant concrete information about what may happen in the instance of a no deal Brexit on 31 October 2019, there continues to be uncertainty. Whilst parliament has ruled out a no deal, this is still not something to be dismissed without thought.  For internationally mobile employers, preparations for potential double social security charges and/or additional social security compliance requirements should be considered.

Current EU regulations make sure that internationally mobile employees and employers, working within the EEA, are subject to social security in only one EU member state. However, this harmonisation may end if the UK leaves the EU without a deal.

The UK government has attempted to prepare for this impact by HMRC setting out a proposed UK position on the implications in their December 2018 and April 2019 publications. Our summary of the April 2019 guidance can be found in a previous post found here.

The guidance contains inherent uncertainties and it is important to note that, whilst the UK has a fairly sizeable network of social security totalisation agreements, these fall short of the current EU regulation coverage and would take some time to match it. Many social security agreements are outdated ignoring modern assignment lengths and work patterns. Additionally, the UK doesn’t have agreements with some key EU trading partners such as Poland, Romania, and Czech Republic.

New social security agreements (coming into effect after Brexit) have already been concluded with both Ireland and Switzerland. However, they are both different introducing more complexity, perhaps a sign of things to come. The UK-Ireland agreement mirrors the existing EU regulations, whereas the UK-Switzerland agreement mirrors existing EU rules for individuals working across the two countries prior to Brexit, but the historic UK-Switzerland totalisation agreement comes into force afterwards.

Employers may need to review their business structure (i.e. where international pan-European roles are based) and/or international assignments structure to avoid any double social security charges. However, the tax impact must be weighed against those of people and cost. Close co-ordination will undoubtedly be required between tax, finance and HR departments to proactively address issues as they arise and become clearer.

Whilst some international employers will undoubtedly favour a wait and see approach, real planning is required now to minimise the potentially extensive impact. Employers should consider and review their budgets closely in the run up to a no-deal Brexit and consider whether changing the timing of assignments (e.g. bringing planned assignments to an end before Brexit) will alleviate any potential future issues.

At PKF Francis Clark, we have specialist international tax and global mobility teams and they work closely with our partner firms in the PKF international network. If you have any queries, or feel you need further advice, please contact our team [email protected].


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