Contracting in the UK After Brexit: Potential Changes for Self-Employed

As an English-speaking country with long membership in the EU, the United Kingdom has been an appealing location for international contractors.  The UK’s reputation as a business center and its diverse population opened up many opportunities for contractors from other countries within the EU.

The Impact of Brexit on Contracting

However, with the passage of Brexit where the UK will now be leaving the EU, business activity of all types will be affected, including contracting services for UK companies.  Some contractors may have avoided or left the UK recently due to uncertainty around Brexit, but even as that transition occurs, there may be new solutions available for working in the UK.  There is an interest by both the EU and UK governments to find mutual ways to support trade, including the movement of self-employed contractors.

Much of that will depend on how rules in the UK will change for non-resident self-employed from the EU (as well as reciprocity for UK contractors working in the EU).  Currently, Brexit is in a ‘transition phase’ until the legislation is fully implemented on December 31, 2020.

The rules in the transition phase may differ from those under the final Brexit, so whatever conditions are in place now could change as the EU and UK continue to negotiate the details.  The core of the negotiation is a future trade deal which will affect all business activity between the EU and UK, including contractors and self-employed.

 

Contractors Already Working in the UK

Many contractors will already be living with ongoing work in the UK from pre-Brexit, and that could be an advantage going forward as it may ease the process for obtaining any work permit or residency under new immigration laws.

EU Citizens

While there are still doubts about how existing EU self-employed in the UK will be treated under Brexit, there is some momentum to allow them to continue working under the same status as pre-Brexit if they have been in the UK for five years or more.   The process may be more rigorous for those with less than five years, as they will no longer have an advantage over applicants from other countries.

Previously with ‘free movement’ rights, EU citizens did not need a work permit for the UK, but that may change with Brexit, along with some type of permission to reside in the UK.  Contractors who have been working in the UK long term may have a registration certificate or permanent residence document, which could help document the time spent, but that wont guarantee a right to work post-Brexit.

 

Contractors New to the UK

EU Citizens

EU Contractors who have never worked in the UK will have to start ‘fresh’ under the new law and should be prepared to meet the criteria for a work visa/residency.  One possibility could be the ‘start-up’ (previously ‘entrepreneur) visa, although it does require a significant investment of funds.

If an EU contractor is intent on working in the UK in the future, one strategy would be to go and set up as a self-employed during the transition period while free movement still applies.  Then, they can navigate the new rules as they are finalized with at least some presence in the country.

 

Non-EU Citizens

As before, non-EU citizens will need a work permit with a registered UK sponsor, which usually means an employer rather than a client, as many companies will be unwilling to take on that task for an independent contractor.  Even so, if you change clients you also have to change sponsors for your work permit.

If some aspect of Brexit retains the freedom to travel and work for EU citizens, those new rules are unlikely to be applied to non-EU citizens.  There are ways to overcome this such as using an umbrella company registered in the UK to sponsor a work permit as a de facto employer.

 

What About UK Contractors Who Want to Work in the EU?

UK citizens that want to contract with clients in the EU will also be affected by Brexit.  Changes to freedom of movement, work permit requirements and other trade issues will likely be reciprocal in the treatment of UK contractors.

 

What Areas Could Change for Contractors Post-Brexit?

Depending on the outcome of trade negotiations, contractors may face changes to a number of items in addition to work permits, including social security compliance and cross-border protection, as well as tax residency/rates and payment of VAT.  There may be a new type of tax treaty to avoid double taxation on income earned, along with rules on withholding and filing for self-employed.

 

How Contractor Taxation Helps Contractors in the UK

The only certainty is that contracting in the UK is not going to be simpler post-Brexit.  But Contractor Taxation is closely monitoring all developments affecting contractors and offers a network of umbrella companies in the UK who can help you get set up if you are new to the UK, or if you just need professional support for existing contracts.

The umbrella company acts as your ‘employer’, sponsoring work permits, withholding taxes and facilitating payments with one or more clients.  They are a true intermediary with the expertise to help contractors during the transition period and into the post-Brexit landscape, to ensure full compliance and uninterrupted work.

Please contact us if you need more information about contracting in the UK and Europe as this important change with Brexit becomes finalized.