After many months of speculation, the UK and the EU finally agreed a post-Brexit trade agreement to apply from January 1, 2021, onwards. An important component of the post-Brexit UK/EU trade agreement is the rules around social security contributions for employees who spend time working across the EU.
RSM summarises the agreement from a social security coordination perspective and highlights the practical and administrative actions that employers of globally mobile employees should take now.
The terms of the Brexit withdrawal agreement will continue to apply to individuals who were working in another EU or EEA country up to December 31, 2020.
In summary, the social security position of UK employees who were working in another EU or EEA location before December 31, or for EU/EEA employees who were working in the UK, will broadly continue to be as follows:
UK individuals working across the EU and EU individuals working in the UK from January 1, 2021, onwards will be governed by the terms of the social security coordination protocol as set out in the new trade agreement.
The rules of the agreement are broadly similar and consistent with the previous ones. In summary, the main updates to the rules are as follows:
The new rules apply from January 1, 2021. Forms A1 can be applied for to confirm that an employee (who is on assignment from January 1, 2021) will remain in their home country social security scheme and be exempt from social security contributions in the host location for up to 24 months. For example, a 24-month form A1 could be obtained for a UK employee working in Sweden to confirm their continuing liability to UK national insurance and exemption from Swedish social security for that period.
The rules for individuals who work simultaneously between the UK and other EU locations also remain broadly the same. Such individuals are known as multi-state workers. In these circumstances, social security would usually be due in the country in which the individual resided, if they spent at least 25% of their time working there. This position would again be dependent on the relevant EU locations opting into the agreement.
The social security position for UK individuals working in Norway, Switzerland, Iceland, Lichtenstein and individuals from those locations working in the UK from January 1, 2021, onwards will not be covered by the above EU rules.
HMRC has said that the following rules will apply to assignments to/from these locations based on existing and historical social security agreements in place:
EU employers with employees subject to UK NIC will still be liable to account for employers’ NIC even if they have no tax presence in the UK.
UK employers with employees subject to EU social security may be required to account for employers’ social security in the home country, although some countries allow for the employee to account for both employee and employer social security.
If you have globally mobile employees who may be affected by any of these rules, we recommend taking the following actions now:
If you have any queries or questions on implementing the above actions, please contact James Tetley on james.tetley@rsmuk.com.
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