Brexit - NIC after a no-deal Brexit

UNITED KINGDOM - Brexit - National Insurance contributions (NIC) after a no-deal Brexit

February 2019

As part of its prudent planning to cope with a no-deal Brexit should that occur, the Government has recently addressed the amendments that would be needed to UK NIC legislation.

The key problem in this area is that the current cross border social security arrangements are dependent on coordination between EU/EEA Member States – not something that can be assumed in a no-deal Brexit scenario. Therefore, the Government has published four draft Statutory Instruments that amend the UK's EU Regulations on social security coordination.

The draft regulations would maintain the current 24 month extension of NIC for employees posted to an EU member state and the 24 month exemption for inbound employees moving from EU member states into the UK. The draft regulations also seek to apply the current rules for multi-state workers.

While this may seem a practical approach, there is no guarantee that EU or EEA member states will also seek to preserve the status quo. Interestingly, the draft regulations do not take account of the longstanding bilateral social security agreements that the UK has with some EU Member States: it is assumed that these would revive when EU based agreements end on the UK’s departure from the EU (overriding a new domestic NIC regulations where they apply).

As well as leaving a patchwork of social security rules for employers to cope with, where there is no bilateral agreement with an EU member state, there is no guarantee that that state will put new reciprocal rules in place. Therefore, double social security charges could apply, for example in the first 24 months of a secondment to an EU member state as well as for employees with simultaneous roles in the UK and in an EU country.

Employers with numbers of internationally mobile workers should be enhancing their monitoring systems to ensure that they are ready for the additional administrative burden that may arise (not to mention the potential additional costs) on a no-deal Brexit.

Karen McGrory