With all the attention that’s been focused on the COVID-19 pandemic this year, it might be easy to forget that the United Kingdom’s withdrawal from the European Union is set to fully take effect on Jan. 1, 2021.
The UK and EU are currently in month No. 9 of an 11-month transition period designed to give the two sides time to negotiate new agreements before 2020 comes to a close. Discussion over a new trade deal is ongoing, though we may get some updates this week — a European Council meeting is scheduled to begin on Oct. 15, and EU-UK relations is on the agenda.
For mobility teams, it’s a good time to review your UK- and EU-based employees and whether they might face any impacts when we flip the calendar. A new points-based immigration system is set to take effect at the beginning of next year, and it figures to create a layer of complexity when it comes to people moving between the two areas. As the article below from AIRINC discusses in detail, a new EU Settlement Scheme will allow EU, European Economic Area and Swiss citizens to continue living in the UK moving forward under the new system. However, these individuals must apply to remain in the country, and the deadline to do so is June 30, 2021.
Tax regulations will also be worth monitoring in the next few months. UK and EU leaders are currently negotiating what in effect would be a broad totalization agreement, which would eliminate dual taxation for international assignees who cross between the two regions. However, if a larger deal can’t be reached by January, the UK will likely instead negotiate totalization agreements with individual EU counties, or update and apply pre-EU agreements. If a blanket agreement is not in place before the start of 2021, it will be critical to consult with your tax provider to get a clear understanding of the impact.
There are ongoing negotiations between the U.K. and EU in order to address the governing relationship beginning in 2021. The European Commission published a 400+ page draft treaty on March 18, 2020 covering all aspects of the EU’s envisioned Future Relationship with the U.K., including a Protocol on Social Security Coordination, which would, broadly speaking, result in a continuation of existing coordination rules; in effect creating a U.K.-EU Totalization Agreement.