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, there are a number of tax issues to consider for UK employers who are either sending employees on international assignments or hosting incoming secondees.
On exit from the EU, the government may no longer be required to provide the UK personal allowance and certain other reliefs to other EU nationals whilst working here and these may therefore be restricted to UK nationals and residents.
This would mean that, for employers, assignments would be more expensive if an individual is tax equalised, simply because the tax costs will increase.
Whilst this is not a huge issue for employers, individuals can claim gift aid relief when contributing to a UK or EU charity. This could be restricted to UK charitable contributions in the future, although contributions to other EEA based charities (eg in Norway and Iceland) currently qualify, so it could be possible that the UK implements a similar position to Norway for the rest of the EU and gift aid would therefore remain unaffected.
For any rest of world countries, nothing will change.
For any EU countries, nothing will change immediately and A1 and multistate A1 certificates will continue to be valid and continue to be available for new assignments until a complete exit happens.
Once a complete exit has been negotiated, it is unknown what agreements will replace the current 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 would involve the UK renegotiating the social security agreements with each 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, however this may change.
These changes may lead to employers having to consider the wording of current policies and assignment letters. At present, employees have the opportunity to remain in their home country social security system whilst on assignment and be exempt from local social security contributions, but this may not be the case in the future.
If you would like any more information on this issue please get in touch with Anne-Marie Welch or your usual RSM contact.