Emma Bird Tax Transactions Director

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Emma Bird

Tax Transactions Director

Emma is both an ACA qualified accountant and qualified chartered tax adviser, enabling her to take a holistic and commercial view of tax planning opportunities by understanding the impact planning will have on a company’s accounts.

In addition, her background in working with entrepreneurial and owner managed businesses has provided her with significant experience in dealing with both personal and corporate tax matters.

Her areas of specialism include advising on the Enterprise Investment Scheme, schemes of reconstruction, employee incentive schemes (including the Enterprise Management Incentive scheme), the residence position of both individuals and companies, and VAT.

18 Mar 2021

If you are working abroad, how will Brexit affect your taxation?

What is an A1 Certificate?

The A1 certificate was an application for a worker to continue paying social security contributions (or national insurance contributions where you based in the UK) in their home jurisdiction, rather than the jurisdiction in which they are temporarily working.

The form A1 would be sent to the home jurisdiction’s tax authority (HM Revenue & Customs (HMRC) in the UK) who would prove the claim, obtain confirmation from the relevant jurisdiction and then return this confirmation to the individual once their consent had been given.

How has this changed post Brexit?

The ‘aforementioned treatment’ relied upon EU legislation which with effect from 1 January 2021 no longer applies to the UK. As such, there is now uncertainty about how ‘other’ jurisdictions tax authorities will treat A1 claims they receive from the UK. This will probably cause many practical complications which will need to be clarified in the fullness of time.

The UK-EU Trade and Cooperation Agreement (TCA) published details on how the social security rules would be applied between the UK and the EU with effect from 1 January 2021 and this largely mirrors the existing rules providing the work is temporary (up to 2 years).

However, EU States did have the opportunity to opt out of the detached worker rules (as they are known) and they had until 1 February 2021 to do so. Where an EU country does opt out of this protocol, the employer will need to register in that EU country and run a payroll from that jurisdiction under local laws, including deducting local social security. This requirement should mean that social security does not need to be paid in the home jurisdiction but for those travelling from the UK to Belgium, France, Poland or Italy this will offer little comfort given their higher rates of social security.

A list of the current EU countries who have agreed to apply the detached worker rules can be found here.

It should be noted that special rules apply to Norway, Switzerland, Iceland and Liechtenstein as they are not within the TCA remit. The UK already has agreements in place with Switzerland and Norway to provide a two- and three-year exemption (respectively) from paying social security in the host country.

Currently we believe that a worker should be able to apply for a one-year exemption when working in Iceland and that this can be extended with Iceland’s agreement during that 12-month period.

However, there is a risk of double contributions having to be paid in Liechtenstein as local social security will have to be paid, and UK national insurance also needs to be paid during the first 52 weeks.

What happens if a worker was on an EU placement as of 1 January 2021?

Those workers that are in place on 1 January 2021 will largely be protected and their A1 Certificate should remain valid until the point which the period of work gets interrupted. A definition of what constitutes an interruption is not clear, but this may include the change of an employer, or being seconded to another jurisdiction.

Where a detached worker arrived in the seconded jurisdiction after 1 January 2021 but before the deadline for EU countries to opt out by 1 February 2021, it is expected that the agreement obtained prior to 1 February 2021 will remain valid.

What should Employers do?

Where the TCA Protocol applies, employers should still be able to continue to apply to the home country’s social security office for an A1 Certificate to obtain an exemption from the host countries social security contributions.

Where an employee does need to pay host social security then the employer will need to register in the host country and report payroll taxes under local rules.

Where the employer has no place of business, the employee should be able to take over the responsibility for payroll taxes so long as there is mutual agreement (between the employer and the employee) for them to do so.