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Tax Talk: Social security for mobile employees after Brexit

As the UK will no longer be part of the EU community after 31 December, social security agreements with EU countries will be subject to new provisions. Here’s what you need to know.

Social security often gets overlooked when companies move people to work in other countries. It is either assumed to follow the tax position or just completely forgotten about. But social security is independent of tax and has different rules and regulations.

When employees move within Europe or the EEA for a fixed period of time under a secondment agreement (usually two years), a Certificate A1, PDA (Portable Document A1) or E101 can be applied for.

The certificate provides evidence that EU social security coordination rules have been considered and that home country social security contributions will be due.

Brexit brings us new challenges. HMRC has released guidance for UK employers sending or receiving workers to or from the EU, the EEA or Switzerland from 1 January 2021. 

The UK outbound rules 

For employees starting work in the EU, EEA or Switzerland before 1 January 2021 the current rules will continue to apply after 31 December 2020. This is regardless of whether a future relationship agreement between the UK and the EU on social security coordination is agreed or not, per the provisions in the Withdrawal Agreement.

Current certificates will have an end date and UK social security should be paid until the certificate expires.

Employers and individuals should continue to apply to HMRC for PDA1s and E101s, as normal, for employees who are to start working after 31 December 2020 in a situation involving the UK and one or more of the EEA countries and Switzerland.

HMRC will issue further guidance as negotiations progress.

The UK inbound rules

If you employ a person from the EU, EEA or Switzerland before 1 January 2021 and they have a PDA1 showing they are subject to an EEA country or Swiss legislation, UK National Insurance need not be paid for the period stated on the PDA1, even if it ends after 31 December 2020, so long as their situation remains unchanged.

If an individual has a PDA1 showing they are subject to UK legislation, both employer and employee will have to pay UK National Insurance.

For employees from the EU, EEA or Switzerland starting work in the UK after 31 December 2020, the situation is slightly different. If they do not have a PDA1 and they work in two or more of any of the UK, EU, EEA countries or Switzerland, an application should be made to the social security institution of the country where they normally reside.

Agreement with the Republic of Ireland

The UK has reached a reciprocal social security agreement with Ireland so that social security coordination continues after 31 December 2020 on the same terms that are currently in place for UK-Irish National moves.

What about immigration rules?

After 31 December 2020, employees should check the immigration rules for the country in which they will be working. Although Part Two of the Withdrawal Agreement protects social security coordination rights for certain UK and EU citizens, it doesn’t protect the right to work in countries in which they are not resident – unless they are a UK national with rights as a frontier worker by 31 December 2020. Simply put, a frontier worker is someone who lives in one country but travels to work in another on a regular basis. 

If an employee is an EU, EEA or Swiss national and they haven’t applied for settled or pre-settled status, they should consider registering with the EU Settlement Scheme by 30 June 2021.

Will there be further changes?

The Government has been clear that there will be changes to future social security coordination arrangements for those individuals not in the scope of the Withdrawal Agreement and related agreements with EEA EFTA  countries and Switzerland. The Government continues to work with the EU to establish practical, reciprocal provisions on social security coordination which include preventing having to pay social security in two countries at once.

If you have any questions please