Brexit Expats – The EU Referendum Impact & Implications for Internationally Mobile Employees

With a new prime minister already occupying Number 10 Downing Street and an almost daily diet of resignations, votes of no confidence and potential leadership challenges are filling the plates of the main opposition party.

However, the extent of the UK’s departure from the EU and the impact that the decision made will have on day to day life for the ‘man or woman in the street’ is as yet unknown and is likely to stay that way for some time. Rumours in relation to many emotive topics abound, such as immigration, freedom of trade, income tax, social security, pensions and passports. As well as the perhaps less emotive topics such as participation in the Eurovision Song Contest or any European sporting completion!

The answers to some of these questions will become clearer quicker than others. The UK will have two years to arrange new deals with EU member states and to formally exit the European Union under article 50 of the Treaty on European Union. However in the meantime many Employers with international operations are still left with the question of how Brexit will impact their internationally mobile employee population. The answer to that is, unfortunately, a resounding ‘watch this space’. Summarised below are some of the many questions that will need to be clarified for employers with internationally mobile employees, expatriates from the European Union working in the UK, or UK employees working in the European Union.

Brexit Impact on Work Permit Requirements

This is probably one of the biggest concerns for employers with internationally mobile employees or indeed the expat employees personally. Currently, a national or citizen of the European Economic Area – comprising of 28 EU countries plus Iceland, Liechenstein and Norway – or a Swiss national/citizen can travel freely throughout the EEA and have the automatic right to live and work in any other EEA jurisdiction without the requirement to obtain a work or residence permit, or seek approval from the ‘host’ country.

The UK’s exit from the EU may remove or seriously impact a UK national or citizen’s ability to live or work in any EEA jurisdiction without the need for work and/or residence permits. Any restrictions or red tape that is applied due to such movement as a result of Brexit will almost certainly significantly increase the administration and cost burden for organisations looking to mobilise UK employees into legacy EEA locations. Additionally, the ability to mobilise UK employees rapidly to previously easily accessible locations will be reduced due to the application for and processing of work or other authorisation permits.

Brexit Social Security Impact

The other significant challenge that may exist for individuals mobilising within the EEA is in relation to social security. Currently EEA nationals or citizens working within the EEA are covered by an EU Social Security Coordination Directive which essentially provides common rules to protect the social security rights of individuals when moving within Europe.

Whilst the rules on social security coordination do not replace the specific and individual national systems of each EEA jurisdiction with a single system (all countries continue to be free to decide who is to be insured under their legislation, which benefits are granted and under what conditions), the directive does provide clear and consistent rules in relation to individuals who either –

• Live and work in one country;
• Live in one country but work in another country;
• Posted for work from one country to another country;
• Work in more than one country;
• Don’t work

The UK’s exit from Europe may remove the right of UK nationals or citizens to social security coordination, potentially resulting in fragmented social security contribution records and a change in entitlement to benefits or government based healthcare when working in legacy EEA locations.

Brexit Income Tax Impact

This is one unsavoury topic that strangely may be relatively unaffected by the UK’s exit from Europe, in at least certain contexts! Income tax liabilities, implications and obligations for individuals working in a particular location are almost exclusively determined by the income tax legislation of that jurisdiction. However, when individuals work temporarily or for short periods of time in another location (within the EEA or otherwise), a network of double tax treaties exist in order to determine which jurisdiction – the ‘home’ country or the ‘host’ location – has the primary right to tax a particular source of income.

The UK currently has double tax treaties or ‘agreements’ with more than 130 countries around the world and it is these agreements which determine the primary right to taxation when a resident of the UK works in, or receives income from, one of those other territories. As each double tax treaty is a specific agreement between the UK and the other territory, in theory our exit from Europe should have no impact on the current rules in place.

Business As Usual at activpayroll

These are strange times and we are in unchartered waters as a result of our impending departure from the European Union. During the course of the coming weeks, months and even years, many things are likely to change, from work permits to payroll, and our Global Mobility Teams are there to help. Whilst activpayroll can’t promise to save the UK’s place in the Eurovision Song Contest, we can ensure that our clients are kept informed and up to date with all relevant developments as a result of Brexit therefore to quote the already well used phrase – “watch this space”.