Alvarez and Marsal

A&M Tax Advisor Update

New Year, new Social Security agreement with the EU

Louise Jenkins, Managing Director

ljenkins@alvarezandmarsal.com

Tracey Norton, Senior Director

tnorton@alvarezandmarsal.com

January 7, 2021 / Europe

In the first of a short series of articles, we look at some good housekeeping tips for finishing the 2020 tax year across Europe and as we approach the 2021/22 UK tax year.

Finally, the Brexit deal has been agreed between the UK and the EU which has helped provide some welcome clarity going into the New Year, one of which is Social Security. It’s hard to make any plans when you don’t know what the rules are going to be, but we all now have a limited period of time to do some new year planning and compliance.

In essence, the headline news is that the principle of only paying in one member state, and now by extension the UK, has been preserved. So you may think, great, no changes and therefore no action. However, in a year where we still have a global pandemic, it is not quite that straightforward, with Social Security and Health Insurance being paramount concerns.

For detached workers, the rules continue to apply to individuals who have been assigned by their employer to work in the UK or an EU territory. However, each EU Member State has been granted the option as to whether they opt-out of these rules which results in a local obligation arising rather than remaining home country insured.

Opt-in Member States

For UK outbound employees to the EU, they should be able to remain in UK National Insurance. For EU outbound employees coming to the UK, they too should be able to remain in their home country regime, for up to the existing 24 month period. In addition, if the Member State is yet to decide their position however the employee’s assignment has already begun, the detached worker rules will continue to apply irrespective of whether the Member State later decides to opt-out.

It is therefore critical that employees or their employer already has, or applies for a Certificate of Coverage (A1) for each worker before 31 January 2021. We are well equipped to provide practical advice and support in obtaining the certificates, and in particular, helping with the “accidental expats” you may now have as a result of employees working overseas due to Covid. Just simply continuing to operate UK PAYE and NIC via a UK payroll is unlikely to be enough to meet your compliance obligations, and as per below, also ensure employees have appropriate health insurance coverage…

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