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International Social Security After Brexit Leaves More Questions Than Answers

By Steph Smith


The U.K. is in transition. The government secured the agreement of the House of Commons to leave the European Union (EU), known as the European Union (Withdrawal Agreement) Act 2020, thus allowing the U.K. to move into the transition period. This article discusses next steps in relation to social security from a global mobility perspective.

Until now, when companies were posting workers on international assignments within the EU, an A1 certificate was applied for, which meant that an employee could remain within their home country social security system, rather than contributing to their host country system. This arrangement avoided the employee having any gaps in their home country social security record and also exempted the employer from making secondary (employer) contributions to the host country system.

There has been uncertainty regarding these A1 applications as we have moved, and continue to move, through the various steps of the Brexit negotiations. This has led to countries taking different approaches to issuing these certificates during this period. Some took a strict approach to applications that were U.K.-touching having an end date restricted to the initial Brexit deadline in October 2019 in case of a “no deal Brexit” arising. Others took the approach that applications could continue as normal.

In 2019, Her Majesty’s Revenue and Customs (HMRC) began to issue a communication to those who had a U.K. A1 certificate in place to advise them that they should reach out to the host country social security authority. This way they could confirm whether their certificate would remain valid following the Brexit deadline, or whether they would need to begin to contribute to social security in that country, too, potentially leading to double social security costs. This was likely issued to ensure compliance in case there was a “no deal Brexit.” However, the communication ultimately led to more uncertainty.

The Next Stage of the Brexit Process

With the European Union (Withdrawal Agreement) Act 2020, we have now moved to a different stage of the Brexit process. The transition period in which we now find ourselves (as of 31 January 2020) means that the EU regulations will continue to be applicable in the U.K. until the end of 2020. Any applications that have been granted and are due to end during this transition period will continue to apply as normal. Many EU jurisdictions are also allowing new applications to be made within this transition period, to then end at the end of the transition period. This is in the hope a deal will be struck in the interim to allow a similar system to be put in place allowing continuity for internationally mobile individuals.

There is then a question of what will happen to those who continue to be working overseas after the end of this transition period. The ongoing negotiations between the U.K. and the rest of the EU will cover the long-term arrangements for international social security, and there are several options open to the parties involved.

It is possible that the U.K. and EU will come to a very similar arrangement, perhaps even looking back to the old EU regulations. Many advisors and internationally mobile individuals hope that this is the chosen route. This would mean continuity and clarity from the outset for business travel, which in the wake of Brexit and the COVID-19 pandemic would be highly beneficial for business.

The hope is that an agreement is put in place between the U.K. and the remaining EU states that allows for an A1 certificate or new equivalent to be obtained in a similar way to the current process, allowing individuals posted overseas to continue to pay social security only in their home state.

However, there is always the possibility that the route taken is much more complex, potentially even leading to no arrangement being put in place in the wake of a “no deal Brexit” after the end of the transition period. This could potentially lead to a complicated and time-consuming period of further negotiation, looking at individual social security arrangements between the U.K. and each separate EU state. There could then be periods where there is no agreement in place and therefore internationally mobile individuals having to pay social security both in their home location and their host location, depending on their individual circumstances, for an undetermined period of time.

In many global mobility programs, employers look to ensure the mobilizing employee is no worse off as a result of an international mobilization—and to alleviate the burden of the double social security cost for the employee—and may look to fund the social security in the host location on behalf of the employee. This could mean employer and employee social security will be funded by the employer in the host location, along with employer social security still being due in the home location. These costs could potentially be prohibitive for many employers, which means the global business world that we currently see could change significantly.

The long-term prospect of having a period of double social security being charged to individuals means that down the line, at retirement, individuals will need to keep track of their global social security contributions to ensure they get their entitlements, if any, to the retirement pensions and benefits in each location in which they have contributed. This is a complex and time-consuming situation for all involved for a benefit which, likely, will be minimal.

While we believed that once the transition period came into force we would then be on the route to some clarity on these issues, the arrival of the COVID-19 pandemic means that timelines previously put in place are very likely to be under threat. While not announced by the U.K. government or EU yet, this global crisis could potentially lead to delays in the transition negotiations as governments around the world deal with this unprecedented situation. One can imagine that social security agreements are not at the forefront of discussions. However, this delay, if it comes to fruition, will lead to greater uncertainty.

With A1 certificates generally only being issued up to the end date of the initial transition period (31 December 2020), it could mean more double social security costs or additional A1 certificate applications and associated advisor costs for individuals and their employers are upon us before we know it.

There are many uncertainties and so many potential outcomes that discussions on this could run on and on. Until we have clarity on the outcome of the Brexit negotiations, there is much to consider. Until we get to that point, there will certainly be more questions than answers.

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Steph Smith has more than 10 years of tax consultancy experience, most of which she has spent specializing in global mobility matters, most recently as Global Tax Manager at activpayroll. Prior to joining activpayroll and after graduating from law school, Smith spent a number of years in private practice in the global mobility division of one of the Big 4 firms, dealing primarily with the globally mobile populations of oil and gas clients. Smith now specializes in managing clients’ internationally mobile employee populations, providing employment tax, income tax, and social security guidance for companies with globally mobile employees and has experience across all industry sectors. In her spare time, she is a keen musician and singer with a love of jazz. She is also elected to the City of Edinburgh Council, representing the area where she grew up.