01 July 2021

The CIPP policy and research team provide an overview of changes to the rules that have effect from January 2021

Although the UK officially left the European Union (EU) on 31 January 2020, a post-Brexit transition period was implemented which lasted until 31 December 2020. During that period, no major changes took place as the EU and the UK used the time to undertake negotiations relating to the EU-UK Trade and Cooperation Agreement (‘the Agreement’). From 1 January 2021, however, and as predicted, we started to see changes.

This article provides a high-level overview of the social security contributions considerations following Brexit, for workers from the UK working in European Economic Area (EEA) states (which comprises the 27 EU members states and the four European Free Trade Association (EFTA) states – see tables below) and those for workers from these states coming to work in the UK.

The Agreement covers social security co-ordinations only with the EU, so these do not extend to the EFTA states. Accordingly, the ongoing rules for social insurance contributions for workers moving to or from the UK and Iceland, Norway and Switzerland are prescribed in long-standing reciprocal social security agreements. No such agreement exists between the UK and Liechtenstein. (The social security rules for movement of workers between EU and EFTA states are not affected by the Agreement.)

 

UK workers working in EU, EFTA

Where an individual is required to pay social security contributions depends on the specific circumstances but also on the country in which they are going to work. This applies regardless of whether they are classed as an employee, a self-employed individual, or an employer.

If a person from the UK works in the EU they will only be required to pay into one country’s social security scheme at a time, and this is ordinarily the country in which the work is carried out. There are some exceptions to this rule, however, and those working in certain occupations and those who are only working on a temporary basis in the EU, Iceland, Liechtenstein, Norway or Switzerland, may continue to pay National Insurance contributions in the UK, negating the requirement to pay social security contributions abroad.

Individuals may continue to pay National Insurance contributions in the UK only where they have the appropriate certificate or documentation from HM Revenue & Customs (HMRC). The individual or their employer should apply for the certificate or document in scenarios where they are:

  • only working temporarily in the EU for up to a maximum of two years
  • a multi-state worker who works in the UK and one or more EU countries
  • a civil servant who is working for the UK government
  • working onboard a vessel at sea, which has a UK flag
  • working as flight or cabin crew members, but where their home base is within the UK.

Where an UK individual is working in an EFTA state, they or their employer have the option of applying for a certificate or document to continue to pay UK National Insurance contributions in certain scenarios (http://ow.ly/AK3I30rGeXf).

An individual going to work in Iceland or Liechtenstein, who is not eligible for a certificate or document from HMRC, may be required to continue paying National Insurance contributions for the first 52 weeks, where the following three conditions are met:

  • their employer has a place of business in the UK
  • they are ordinarily a resident in the UK
  • they were living in the UK immediately prior to starting work abroad.

There may also be the requirement to pay social security contributions in Iceland or Liechtenstein, but individuals will need to liaise with the appropriate social security institution to establish whether this is the case. Where those conditions do not apply, individuals will be required to pay contributions but will not need to pay contributions in the UK during this time but could potentially pay voluntary contributions.

 

Workers coming to the UK from EU, EFTA states

Where an individual arrives to work permanently in the UK from the EU, Norway, or Switzerland, they will only be required to pay into one country’s social security scheme at a time. If the work is being completed in the UK, then that is where the payment will usually be required.

Those who work in specific occupations or are only working in the UK on a temporary basis may be able to obtain a certificate from the social security institution of the state they have come from, to allow them to pay social security contributions there. Subsequently, there would be no requirement to pay National Insurance contributions in the UK.

Where individuals possess the relevant certificate or document from the social security institution in their country, they will continue to pay social security contributions in that state. The individual or their employer should apply for the certificate or document in scenarios where they are:

  • coming to work temporarily in the UK from the EU for up to a maximum of two years
  • a multi-state worker working in one or more EU countries and the UK
  • a civil servant working for an EU government
  • working on board a vessel at sea, with an EU flag
  • working as a flight or cabin crew member, where their home base is in the UK.

There are various scenarios in which an individual should apply for a certificate to continue paying social security contributions in the EFTA states, and are coming to work on a temporary basis in the UK (http://ow.ly/ak6W30rGgiu).

Anyone who comes to work in the UK and is not eligible for a certificate or document from an EU or EFTA state, will be required to pay UK National Insurance contributions. The same applies if somebody comes to work in the UK on a permanent basis.

Certificates, documents and guidance from HMRC

An individual’s circumstances dictate which certificate or document they are eligible for. The main forms are as follows:

In situations where HMRC advises an individual that they must pay UK National Insurance contributions, a certificate or document will be issued for use as evidence that there is no requirement to pay social security contributions in the EU or EFTA states.

An individual resident in an EU or EFTA state should liaise with the social security institution in the country they come from for advice on applying for a certificate or document.

Where an individual’s situation changes, and they wish to check whether this prevents existing social security rules applying to them, they need to send a letter to HMRC, advising: what their circumstances were; what has changed; and when those changes took place.

 

Composition of the EU, EEA, EFTA

The EEA comprises 27 EU member states, and their overseas territories that are legally part of the EU, and Iceland, Liechtenstein, and Norway. The latter three countries plus Switzerland are members of EFTA.  


 

Featured in the July/August 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.

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