National Insurance – Transition rules from 1 January 2021
Changes for UK employers sending workers to the EU, the EEA or Switzerland from 1 January 2021 and for workers from the EU, EEA or Switzerland coming to work in the UK
The UK will see a number of changes come into force from 1 January 2021 as a result of Brexit. One of the areas that will impact employees and therefore businesses is the current social security regulations in respect of workers moving cross border within the EU (including EEA countries and Switzerland).
There is a transition period until 31 December 2020 during which the current rules on social security coordination continue to apply.
Employee starting work in the EU, EEA or Switzerland before 1 January 2021
Current European social security rules will be used to work out which country’s social security scheme you will have to pay contributions to. This covers UK based employees who will start working in one or more of the EU, EEA countries and Switzerland before 1 January 2021, and those from UK, EU, EEA/Switzerland working in one or more of those countries before 1 January 2021.
Applying for an A1 certificate for a period that starts before 1 January 2021
Provisions in the Withdrawal Agreement ensure that the current EU social security rules will continue to apply after 31 December 2020 to certain individuals, whether a future relationship agreement between the UK and the EU on social security coordination is agreed or not.
Employers and individuals should continue to apply for A1s if they are to start working before 1 January 2021 in a situation involving the UK and one or more of the EEA countries and Switzerland.
If HMRC has issued an A1 that started before 1 January 2021, UK National Insurance contributions (NIC) will be payable for the period stated on the document. However, please see the ‘Right to work in the EU, EEA and Switzerland after 31 December 2020’ part of this article if the certificate has an end date after 31 December 2020.
Employees starting work in the EU, EEA or Switzerland after 1 January 2021
The Withdrawal Agreement
The Withdrawal Agreement sets out the terms of the UK’s withdrawal from the EU and provides for a deal on citizens’ rights in Part Two.
- Part 2 of the EEA EFTA Separation Agreement
- Part 3 of the Swiss Citizens’ Rights Agreement.
Applying for a A1 certificate for a period that starts after 1 January 2021
Employers and individuals should continue to apply to HMRC for A1s for employees who are to start working after 31 December 2020 in a situation involving the UK and one or more of the EEA countries and Switzerland. For example, an employee you send to work temporarily in France.
Whilst negotiations are ongoing, HMRC will only be able to process applications for A1s for employees in scope of the Withdrawal Agreement, one of the related agreements with EFTA countries and Switzerland. Further guidance will be issued in due course.
Workers from the EU, EEA and Switzerland coming to the UK
If you employ a person from the EU, EEA or Switzerland before 1 January 2021 and they have a A1 which shows they are subject to an EEA country or Swiss legislation, you will not have to pay UK NIC for the period stated on the A1, even if it ends after 31 December 2020, so long as the employee’s situation remains unchanged. If they have an A1 which shows they are subject to UK legislation, then UK NIC will be due.
If the employee is an EU, EEA or Swiss national and they haven’t applied for settled or pre-settled status, they should consider registering with the EU Settlement Scheme by 30 June 2021.
If you employ an individual from the EU, EEA or Switzerland who does not have an A1 and they work in two or more of any of the UK, EU, EEA countries or Switzerland, you or the employee should apply for an A1 to the social security institution of the country where they reside.
UK’s future relationship with the EU
The Government has been clear that there will be changes to future social security arrangements for those individuals not in scope of the Withdrawal Agreement and the related agreements with EEA, EFTA countries and Switzerland. The Government continues to work with the EU to establish practical, reciprocal provisions on social security coordination which includes preventing dual concurrent social security contribution liabilities.
Right to work in the EU, EEA and Switzerland after 31 December 2020
For periods after 31 December 2020, employees should check the immigration rules in the country that they will be working in. Although Part Two of the Withdrawal Agreement protects social security coordination rights for certain UK and EU citizens, it does not protect the right to work in countries they are not resident in unless they are a UK national with rights as a frontier worker by 31 December 2020. A frontier worker is a person who resides in either the UK or the EU, EEA or Switzerland who works in one or more of those countries but not the one they reside. So, this could affect individuals resident in the UK who work in the EU, EEA or Switzerland.
The UK’s social security agreement with the Republic of Ireland
The UK has reached a reciprocal agreement with Ireland which ensures that social security coordination continues after 31 December 2020 when considering moves by UK or Irish nationals between the UK and Ireland. The UK and Ireland have ensured that social security coordination continues on the same terms that are currently in place.
Refunds of NIC for Aircrew
If your employee’s home base is or has been in the UK and you and they have paid UK NIC, but they did not reside in the EU or UK at this time, a refund may be due.