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Employers and employees need to keep calm and carry on

04 February, 2020

The UK formally left the EU on 31 January 2020 and has entered into a transition period to 31 December 2020. The question everyone is asking is, what happens now?  

Experts from our People and Organisation group have looked at what this phase of Brexit means for employers and employees across three key areas:

  • Immigration and the free movement of people
  • Social security
  • Global mobility and tax

Immigration and the free movement of people

The Common Travel Area (CTA) between the UK and Ireland pre-dates both countries’ EU membership and it will be unaffected by Brexit. 

Under the CTA, Irish and British citizens can move freely and reside in each other’s jurisdiction. They may also enjoy associated rights and entitlements, including access to employment, healthcare, education, social benefits and the right to vote in certain elections. The CTA ensures that Ireland retains its unique position as the only location in which both UK and European talent can travel, study and work without restriction. 

Employers should consider potential immigration requirements for UK national employees moving within the rest of the EU and vice versa.  

Social security

During the transition period, existing EU social security rules will continue to apply.  From 1 January 2021, a revised Ireland/UK social security agreement will take effect. 

The bilateral agreement is designed to mirror the EU social security regulations. It caters for postings up to 24 months in line with EU regulations and multi-state work patterns.

The rules are designed to ensure that social security contributions for nationals of either country will only be made to one country at any given time for those covered by the agreement. Such contributions are recognised in qualifying for benefits in either country.  The exact mechanics of applying for retention under the bilateral agreement have yet to be clarified by the Department. However, we are hopeful of a practical approach. 

The Department of Employment Affairs and Social Protection (DEASP) has stated that, no matter what happens when the UK leaves the EU, nationals from either country in receipt of benefits will experience no change to the reciprocal social welfare arrangements between Ireland and the UK. This provides a level of certainty and continuity for those working between the UK and Ireland and for their employers.

Global mobility and tax

Ireland continues to be a highly competitive location in which to establish European operations, with one of the most educated workforces in the world. 

The Irish income tax regime is also very supportive of people transferring to Ireland. It includes:

  • generous rules around the tax-free reimbursement of relocation expenses;
  • the availability of the remittance basis in certain scenarios (for example foreign investment income and capital gains); and
  • the availability of a favourable expatriate regime (SARP) which can significantly reduce income tax on earnings & benefits over €75,000

All cross-border movements of people are dependent on the individual’s specific fact pattern and the employer’s specific requirements.  Depending on the arrangements put in place, consideration should be given to:

  • Short Term Business Visitor rules in territories (the Irish Revenue recently updated the PAYE rules for business travellers. The changes are welcome, practical and business friendly).;
  • Travel and subsistence (issues may arise where an individual undertakes duties in two locations (i.e. the UK and Ireland);
  • Issues of dual withholding (this may arise where an individual undertakes work duties in two locations (for example, in both the UK & Ireland); or
  • Where the employer puts in place a ‘dual contract’ structure for its employees.

None of the above are triggered by Brexit. However, as Brexit is increasing the movement of people working across Ireland and the UK (given the proximity of both locations), Brexit is shining a light on these issues. 

Without undertaking the necessary due diligence, the points highlighted above could lead to unnecessary tax costs being incurred by the individual or the organisation. As always, all moves to Ireland (whether short-term or long-term, and whether Brexit-triggered or not) should be carefully planned for in advance to maximise available tax efficiencies.

Contact us

Doone O'Doherty

Partner, PwC Ireland (Republic of)

Tel: +353 87 276 8112

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