Brexit and National Insurance – the transition

BLOG3rd Dec 2020

As a result of leaving the EU, the UK will experience a number of changes and one area which will be impacted is that of National Insurance. Negotiations are still ongoing however the below is what we know so far.

If you are an employer sending employees overseas, it can be possible to secure a Portable Document A1 (where the employee is an EEA national working within the EEA), or E101 Certificate (where the employee is a non-EEA national legally resident and employed in an EEA member state), to exempt certain contributions in the overseas location and allow contributions to continue in the home country.

There is presently a transition period until 31st December 2020 during which the current rules on social security coverage continue to apply. Furthermore, there are provisions in the Brexit Withdrawal Agreement which ensure the current rules will apply after 31st December 2020 for certain individuals, whether a future relationship agreement between the UK and EU on social security is agreed or not.

UK employees sent to work in the EU, EEA or Switzerland

Pre 1st January 2021

UK employers and individuals should continue to apply for A1 / E101 certificates in the usual manner to seek HMRC agreement that EU social security rules have determined UK NI contributions apply. Both the employer and employee should pay UK NI for the period stated on the certificate (please see section ‘Future relationship with the EU’).

Post 1st January 2021

Where the period of overseas work is to commence after 31st December 2020, whilst negotiations are ongoing, employers and individuals should continue to apply to HMRC for an A1 / E101 as normal. As it stands, HMRC will only be able to process applications for employees within the scope of the Withdrawal Agreement and European Free Trade Association countries (Iceland, Liechtenstein, Norway and Switzerland). We anticipate further guidance being issued in this area.

Employees from the EU, EEA or Switzerland working in the UK

Where you employ an individual from the EU, EEA or Switzerland before 1st January 2021, providing they have a certificate showing they are subject to EEA legislation, no UK NI will be due for the period stated on the certificate, even if it ends after 31st December 2020, so long as their circumstances under which they obtained the certificate in the first place do not change.

Future relationship with the EU

The Government has made it clear there will be changes to social security arrangements for individuals not within the scope of the Withdrawal Agreement, however they are continuing to work with the EU to establish practical, reciprocal provisions to prevent dual liabilities.

Although the Withdrawal Agreement protects social security rights for certain UK and EU citizens, it does not protect an individual’s right to work in countries in which they are not resident unless they are a UK national with rights as a frontier worker (a person who resides in either the UK or the EU, EEA or Switzerland and who works in one or more of these countries but not the one in which they reside) by 31st December 2020. In other words, this could affect individuals who are resident in the UK but who work in the EU, EEA or Switzerland.

We will share further information as it becomes available however should you require any advice or assistance in relation to the above in the meantime, please contact Karen Groat, Craig Burnett or your usual AAB contact.