The United Kingdom has been an appealing location for international contractors. This could be because it is an English-speaking country or because it has a long membership in the EU. Its reputation as a business centre and its diverse population opened up many opportunities for contractors within the EU.
The Impact of Brexit on Contracting
However, with the passage of Brexit where the UK will now be leaving EU, the business activity of all types will be affected. This includes contracting services for UK companies. Some contractors may have avoided or left the UK recently due to uncertainty around Brexit. 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. This interest also includes 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. 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 that will affect all business activity between the EU and UK. This would include contractors and self-employed people.
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 of obtaining any work permit or residency under new immigration laws.
There are still doubts about how existing EU self-employed in the UK will be treated under Brexit. However, there is some momentum to allow them to continue working under the same status as pre-Brexit. This applies 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. This is because 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. However, 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. This could help document the time spent, but that won’t guarantee a right to work post-Brexit.
Contractors New to the UK
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. This could be done 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.
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.
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 several 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. We offer a network of umbrella companies in the UK who can help you get set up. We could also help if you just need professional support for existing contracts.
The umbrella company supports your contracting by 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. They would also help in 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.