This is a guest blog by Umbrella Company Parasol.
Around three and a half years after the UK voted for Brexit, the clock is ticking towards 11 pm on 31st December 2020, the date upon which the United Kingdom will start a new trading relationship with the European Union.
Despite being so close to the end of the transition period, there are still a number of things that Boris Johnson and his Cabinet must iron out. Having missed the original deadline of 15th October, the Prime Minister has very little time left to agree on a trade deal. If a deal isn’t struck, the UK will leave the EU without any trading agreements in place.
So it goes without saying that whatever happens in the coming weeks, from 1st January 2021, things will be different, deal or no deal. Established businesses can expect to feel the effects of Brexit, be that positive or negative depending on which side of the fence you sit. The UK’s smallest companies, including freelancers and contractors, have also been told by the government to prepare for change.
But what specifically do contractors need to know about Brexit? And what, if anything at all, can we be confident of as the transition period comes to an end?
No guarantees over EU working
As part of the EU, UK citizens are granted freedom of movement thanks to access to the Single Market. However, things are set to change when the transition period ends on New Year’s Eve and there will be no guarantee that contractors can live, work or retire in EU countries going forward. This is at least something we can be certain of.
It means contractors living in the UK but working with clients in the EU may well need a visa or work permit to continue doing so. Given the rules vary country to country it’s worth checking this page on the government website. Similarly, if you’re a contractor living and working in an EU country, you should check this page for the latest guidance on visas, work permits and residency.
Immigration changes beckon
Most foreign nationals, including those from EU states, will need to apply online for a visa if they want to live and work in the UK next year. A ‘points-based’ immigration system will decide this, with the government aiming to encourage what they perceive to be ‘skilled-workers’ to settle on these shores.
A score is awarded to an applicant, who is marked based on a job offer (typically with a wage of at least £25,600), their grasp of the English language and skill level in a desirable occupation. How tailored this system is towards overseas freelancers and contractors remains to be seen.
If you’re an EU national already living in the UK, or move here before 31st December 2020, you do not need to go through this process. Instead, you’re required to apply to the EU Settlement Scheme before 30th June 2021.
It is worth noting that due to the Common Travel Area, Irish citizens retain the right to live and work in the UK and reciprocally UK nationals retain the right to live and work within Ireland post Brexit.
With changes to the IR35 legislation on the horizon, many contractors working through personal service companies registered in the UK want to know if the changes will apply to contracts held overseas, whether in the EU or further afield. In other words, from 6th April 2021, will contractors be responsible for assessing their IR35 status when working with medium and large businesses based abroad? Or will businesses be tasked with this?
It depends, but Brexit won’t have any bearing. If a business is based wholly overseas without a permanent establishment in the UK, such as an office, factory or residence, then IR35 reform isn’t a consideration. This means contractors can carry on determining their IR35 status beyond April 6th 2021.
If a client is based abroad but has ties here in the UK, then the reform will apply and the business - assuming it is medium or large - must abide by the new rules. Contractors working with small private sector businesses, whether in the UK or overseas, will maintain responsibility for IR35.
While there are still many unknowns for contractors regarding Brexit, we at least know that the UK will certainly leave the EU at the end of this month. And given the post-Brexit landscape is changing all the time, be sure to pay close attention to the government’s Brexit webpage, where you can stay up to date with everything you need to know.