A Brexit deal was announced by the UK government and the EU on 24 December. One key topic of ongoing negotiations is social security arrangements for cross-border workers moving between the UK, the EEA (the EU, plus Norway, Iceland and Liechtenstein) and Switzerland.
The key principles underpinning cross-border social security arrangements as set out in the Brexit deal to date are summarised below. Please note that in all cases where home state social security charges should continue to apply, the individual or their employer should apply for a social security certificate in the home state. This is in order to relax the social security charges that otherwise may be due in the other country under its own domestic social security legislation.
Social security arrangements remain substantially unchanged for individuals whose work itinerary involves travelling between the UK and one or more states within either the EEA or Switzerland. Employees will continue to pay social security in the state where they habitually reside, which is defined as the place where they have the strongest personal connections, provided they perform at least 25% of their duties there.
If employees do not perform a substantial part of their activities within the state of their habitual residence, they will likely pay into the social security system of the state where their employer has its ‘registered office or place of business’.
Social security certificates for employees whose assignments between the UK and another state within the EEA or Switzerland started before 1 January 2021 remain valid until the certificate expires.
For employees whose assignments commence after 31 December 2020, the social security arrangements vary depending on state, as follows:
- EU states that have opted into the ‘detached worker’ rules and Switzerland: social security charges are payable in the assignee’s home state if the assignment is expected to last for no longer than two years. Social security charges may otherwise apply in the hosting state.
- EU states that have opted out of the ‘detached worker’ rules: social security charges may be payable in the state to which the employee has been assigned.
- Norway and Iceland: social security charges are payable in the assignee’s home state if the assignment is expected to last for no longer than three years or 12 months respectively.
- Liechtenstein: ‘Rest of World’ rules may apply. This means home country social security charges may apply for the first 52 weeks of the assignment
HMRC has already confirmed that Austria, Hungary, Portugal and Sweden have so far opted into the detached worker rules. The remaining EU states have until 1 February 2021 to opt in or out. In the interim, it remains possible to apply for social security certificates in the home state if it has yet to opt in or out.
Currently, there is no guidance as to whether or not the certification periods stated above may be extended. Under pre-Brexit arrangements, the social security certificate could be extended from two to five years. To protect against the risk of being required to pay social security in the hosting state, employers may wish to consider limiting assignments to less than two years, though we consider there may be an announcement in the coming weeks and months to confirm that extensions may be permitted.
We expect further guidance to be published by HMRC shortly on the finer details of the social security arrangements and clarity over which countries have opted in or out of the detached worker rules. We anticipate being in a position to provide you with another update in the next few weeks. If you would like to discuss social security arrangements with one of our global mobility specialists, please do contact us.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.