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 U.K. tax year.

Finally, the Brexit deal has been agreed between the U.K. and the E.U. 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 U.K., 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 U.K. or an E.U. territory. However, each E.U. 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 U.K. outbound employees to the E.U., they should be able to remain in U.K. National Insurance. For E.U. outbound employees coming to the U.K., 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 U.K. PAYE and NIC via a U.K. payroll is unlikely to be enough to meet your compliance obligations, and as per below, also ensure employees have appropriate health insurance coverage.

Opt-out Member States: Employers Obligation

In contrast, for Member States who opt-out of the detached worker rules, this presents a major shift in employers’ routine social security procedures. So far Norway, Iceland, Liechtenstein, and Switzerland have opted-out and local obligations are likely to arise, under the old reciprocal agreements. Others are likely to follow suit, and we will keep you updated through this series of articles. Where Member States opt-out, employees and employers are likely to become liable to pay social security where they work from day 1. For employers, this begins to become problematic for various reasons such as: modifying payroll systems, registering within the Member State for social security contributions, employees obtaining registration numbers in the country, especially in Norway, and the company’s responsibility to withhold employee contributions and pay employer contributions. We strongly recommend assessing employer and employee social security costs early on, given the significant disparity of rates and complexity between the Member States. With strong hands-on experience in advising employers and resolving the complexities of international social security contributions, we are perfectly placed to help with new year housekeeping.

European Health Insurance Cards, Being Replaced by Global Health Insurance Cards

One area that isn’t covered by the withdrawal agreement, is the EHIC. This is the card that everyone was recommended to hold and to always carry with them when travelling within the EEA. For those that hold a valid EHIC, these will remain valid until their expiry date. However, they do have a finite expiry date, down to the day, month, and year. So each card will run out on its own individual date. As an employer, do you know these dates of your employees and their families? Very unlikely. For those whose cards expire and those without a card, you can no longer apply for one and the individual will not be covered. As an employer, you continue to have a duty of care to your employees, and in the small print of a number of travel, repatriation and medical insurance policies will be the requirement for a valid EHIC to be held. It is therefore imperative that employers understand these obligations, where they persist, and that employees are made aware of their obligations and the importance of the EHIC, and to be very mindful of those expiry dates.

The U.K. government intends to replace the EHIC with a GHIC. Don’t be fooled into thinking this means we will all suddenly be covered for medical assistance in the U.S., Australia, etc as well as the E.U., the GHIC is a bit of a misnomer. The expectation is that the GHIC will reflect similar rights of access, coverage and cost reimbursements as the EHIC did. However, there are no transitional rules on this, so if an employee or member of their family is unlucky enough to need treatment or hospital emergency services after an EHIC has expired and before a GHIC is in place, the repercussions could be very significant. Private insurance policies will become critical, and the cover or any exclusions, excesses, etc need to be well understood. We can provide advice on reviewing coverage in place, the tax and social security implications if the employer decides to step in or cover any shortfalls or excesses, and drafting employee comms setting out clearly the company’s policies, procedures, and employee personal obligations.

In our next article we will look at the relatively new growth in “accidental expats” for employees working away from their normal location, again with practical tips on what to look out for, who to look out for, and policies and procedures you may wish to adopt. You will wish to remain agile, cost effective and compliant, which is a difficult balancing act to achieve.

A&M Taxand is an international network that can support your tax and social security needs in home and host locations. Clients value our ability to be agile and move quickly to support their needs. Our U.K. team has extensive in-house practical experience within multinational organisations, which can help at a practical level be best placed to support certificates, costings, payroll, comms, and deadlines. In the meantime, should you need assistance in applying for A1 certificates by the deadline, please contact your usual A&M point of contact or Louise Jenkins, Tracey Norton, Anita Eunson, Shirley Ly, or Linda Cameron.