Brexit – tax changes affecting non-residents

Brexit

Brexit

Brexit – tax changes affecting non-residents

As we write this (early November 2019), we still don’t know whether the UK is likely to leave the EU with a deal or not and with a general election due on December 12th, the outcome is far from certain,

What we do know

HMRC has said that EU nationals will continue to receive the Personal Allowance (PA) for a transition period post-Brexit and the government intends to pass legislation entitling non-resident UK nationals to the PA following withdrawal from the EU.

And National Insurance….?

This is a more complex area which we won’t know about until we know if we’re leaving with or without a deal.

Currently, UK employers with UK employees operating across the EU, EEA and/or Switzerland pay NI based on EU regulations.

With a deal

The UK enters a transition period and operates NI/social security under rules already agreed, which apply until 31 December 2020. New rules for the period after 31 December 2020 will then need to be negotiated with the EU.

Without a deal

In this scenario, the transitional rules would not apply and the UK proposes applying European coordination rules for the purposes of NI calculations. The UK has such reciprocal arrangements in place with a number of European countries, intending to prevent extra social security charges arising. However, these arrangements aren’t binding and if not recognised, may lead to ‘double tax’ being charged on UK employee payments. Even if recognised, many arrangements need to be renegotiated as they aren’t fit for modern working arrangements.

What should I be doing to prepare for a no deal scenario?

Employers should continue paying employers NI until after Brexit.

In the event of no deal, consider if any additional social security contributions are due and make provisions for this likely amount.

There may also be extra reporting and compliance obligations which could vary from country to country, depending on where the UK resident employee is working. Specialist payroll advice may be needed in order to comply with the new rules.

How Curo can help your business

Our payroll team advises UK companies on their UK and overseas payroll requirements, including specialist and confidential payroll issues. If you have UK employees working in Europe and are concerned about how leaving the EU could affect your business, please contact us for specific advice. Call Helen or Nicola on 01527 558539 or email Helen for more information.