Contractors in Europe Post-Brexit: What you Need to Know

The United Kingdom left the European Union (EU) on 31st January, 2020 after both sides concluded a Withdrawal Agreement to facilitate an orderly departure.

Following the UK’s decision to leave the EU, contractors across Europe are now facing a period of uncertainty with regards to how they will be affected going forward.

From issues regarding skills shortages to questions over the potential impact of Brexit on UK regulation, contractors working in Europe are undoubtedly anticipating the likely changes, and how those changes will influence them.

With Brexit still unfolding, current changes aren’t likely to be too significant. However, contractors do need to be aware of how they will be impacted as negotiations come to fruition.

Going forward, how will British nationals be affected going to work in the EU?

As of 1st January 2021, if you are a contractor already registered within the EU and/or working lawfully in-country, then there are no changes in place and you are free to continue working overseas.

Further, if you begin a new contract after the 1st January, then contracting through your Limited Company in the EU will remain largely the same as elsewhere in the world.

If you are a UK tax resident, then you will now be classed as a third-tier country national, meaning you will most likely require a work permit.

Since you are an employee of your Limited Company and your company is not a local entity overseas, then it will not be able to sponsor a work permit for you. Currently, the only notable option is for Limited Company contractors to apply for a ‘self-employed’ work permit.

While these permits aren’t always easy to come by, this is facilitated through the support of a specialist international contracting company, such as Chesterfield.

Are there any exceptions to the new rules?

If you are a UK director of a Limited Company, then it may be a little more challenging to freely contract in the UK when compared with the pre-Brexit climate.

That being said, you will be exempt if you fall under one of the following categories:

  • You are already legally entitled to work within the EU
  • You can acquire permission through marriage
  • You can provide proof of ancestral rights
  • Through investment schemes

If you do fall under one of the above categories, then you will still be able to work abroad while remaining within your home country’s social security system.

Within the EU, you will need to obtain an ‘A1,’ which is a Certificate of Coverage document issued by the authorities. However, once the Free Movement of Persons ends, A1s between the UK and EU will end.

As such, when an EU-based director works within the UK using their Limited Company (or vice-versa), they will be required to pay local social charges or National Insurance Contributions, not home ones.

Double-Taxation Treaties

Double-taxation treaties between states will not change, since they are not EU-wide agreements but bilateral agreements. Nationals from the UK, Channel Islands, Isle of Man and Republic of Ireland remain free to live and work in another’s territories, since the Common Travel Area will also not be subject to change.

Notable areas of compliance

If you are operating overseas through a UK Limited Company (irrespective of location), then you must observe the law in the country you plan to work in. This relates to the following areas:

  • VAT
  • Income tax
  • Social security
  • Employment law
  • Foreign employers
  • Permanent establishments

UK Limited Companies must comply with the specific country’s individual requirements pertaining to the above points.

Despite the negativity surrounding Brexit, there a number of positives for contractors and consultants. As with the 2008 recession, many larger businesses are now turning to contractors and consultants in place of fulltime employees. Combined with the impact of Covid, many businesses are changing their operating models, meaning there are plenty of opportunities and benefits for contractors.

How Chesterfield can help

If you’re considering accepting a contract abroad or your current contract is due to expire, then it’s essential to seek the support of a specialist international payroll/contracting company, such as Chesterfield.

With offices in the UK, Ireland and Cyprus, we’re well-equipped to handle all matters related to Brexit, and will be able to advise you based on your unique circumstances.

Whether you are a UK national seeking a work permit to work in an EU country, or require assistance with becoming self-employed in your country of choice, we’re here to help.

In addition to work permit support, we also offer Payroll services, and can also support you if you wish to be self-employed in the country where you work.

So if you need support navigating your way through these changes, contact Chesterfield today to speak with a member of our team.