Brexit and expatriates working in Europe

16 September 2016

Following the UK referendum in June , there is considerable uncertainty surrounding how the vote to leave the EU will impact employers and employees in the globally mobile workspace. Whilst nothing is certain at present, and further changes are anticipated to become clear over the next two years or more, some key areas to note are as follows:

Immigration

Until the official exit date, European Economic Area (EEA) nationals can continue to live and work in the UK and vice versa.

Any EEA nationals who have been living and working in the UK for more than five (continuous) years can apply for permanent UK resident status. Similarly, any UK national working and living in the EEA for the past five years should also qualify for permanent resident status of that country. Employees may wish to consider applying for permanent resident status to protect their current position. 

Movement of people

Given the movement in exchange rates following the vote , the value of salaries earned whilst on assignment may impact on the amount of income secondees find they have locally. This can understandably lead to individuals deciding to shorten their assignment length, and could also impact the ability of employers to incentivise employees to move to various locations which may now appear to be more expensive than staying in the UK.

Income tax

On exit from the EU, the UK government may no longer be required to provide the UK personal allowance and certain other reliefs to other EU nationals whilst working here. These allowances and reliefs may therefore be restricted to UK nationals and residents only.

This would mean that, for employers, assignments would be more expensive if an individual is tax equalised, simply because the tax costs will increase.

Social security

For any rest of world countries, nothing will change.

For EU countries, nothing will change immediately. However, once a complete exit has been negotiated, it is unknown what agreements will replace the current social security agreements. It is possible that a ‘Norway style’ approach could be taken, whereby free movement of people has to be accepted by the UK as part of gaining access to the single market. The other option would be a complete exit from the EEA system and this option could involve the UK negotiating new or renegotiating lapsed social security agreements with each EEA country individually. This may mean that, at the point of exit, existing A1 certificates may have to be reapplied for under any new agreement.

The impact of a complete exit from the EEA social security system would be likely to impact the ability of people to access benefits that they may have enjoyed previously. For example, currently contributions made in another EEA member state count towards the years’ worth of contributions required to qualify for a UK state pension, but this may change.

All the above changes may lead to employers having to consider the wording of current policies and assignment letters. However, until the terms of the exit have been negotiated, it is unclear how the tax and social security aspects of assignments abroad are likely to change and employers should be mindful of further updates.

For more information please get in touch with Anne Marie Welch or your usual RSM contact.