Firms could be forced to pay double Social Security contributions

Payroll teams need to urgently review Social Security arrangements for employees who work here and in Europe as the UK heads towards Brexit or risk incurring significant costs, say accounting and tax advisory firm Blick Rothenberg.

Robert Salter, an employment and expatriate tax specialist at the firm, said: “If the UK does leave the EU without a deal, companies may have additional obligations and reporting responsibilities and that they are not currently aware of. This could cause chaos for both employer and employee if companies get it wrong.”

He added: “This will depend on what countries are involved because the UK does have some existing arrangements with some EU countries, but nobody is sure whether these arrangements will remain in use or indeed be valid.”

Salter explained: “The EU regulations relating to Social Security cover employees in a number of situations, including:

a) Tele-workers (people who work for the UK company but may live overseas).

b) Statutory directors of a UK company who live overseas.

c) Regular assignees (people who are formally seconded to a different country for a set period of time).

d) International business travellers (those based in their home location officially, who spend significant time overseas working in one or more EU/EEA countries).

If the UK does leave the EU without a deal, companies may have additional obligations and reporting responsibilities with all of the above groups of employees. Core issues that employers need to consider include:

• Where the Social Security is due in the case of a no-deal Brexit – is it still the UK? Is it the overseas location? Or is it in both jurisdictions?

• Additional costs – it is quite possible that employers could become liable to double Social Security contributions (UK and overseas) in some scenarios. Moreover, even if the individual is only liable to costs in one location under the relevant agreement, payroll teams need to realise that Social Security costs for employers in some countries are considerably higher than the UK. For example, typical employer Social Security rates in France are between 40-45% of the total salary package of the employee.

Salter said: “The nature of Brexit means that there are clearly many uncertainties for employees and these issues may not be fully clarified until the very end of the process. However, companies with international employees need to start considering and reviewing the Social Security arrangements that exist for their employees as a priority. Otherwise, they risk incurring significant additional costs and potentially damaging the position of their employees.”

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