29 October 2018
For many years the regulations governing employees working throughout the EU and EEA have operated smoothly. The basic rule is that a person should only be liable to pay local Social Security (National Insurance in the UK) in one EU or EEA state.
Until recently, applying to HMRC for an employee to remain in the UK NIC system when they are working temporarily abroad in the EU has been a simple formality. HMRC issue a 'Form A1' which certifies that they remain in the UK National Insurance system and do not need to pay under the other state’s laws. The certificate is usually valid for two years (but in the past was generally, and easily, extended up to five years).
What has changed?
Since early this year, our experience is that HMRC are being (deliberately?) obstructive. It can now take several months for an application to be processed. Quite often, a person is sent to work in another country at short notice, and they have come back to work in the UK by the time HMRC have responded.
The situation is now complicated by the fact that several EU/EEA countries are enforcing their Social Security laws more strictly than in the past. In particular, France has introduced a severe penalty regime for any French entity making a payment to anyone who does not have an A1 certificate without first deducting Social Security.
Some recent examples
- A certificate issued in August 2017 with an expiry date of 31 December 2017
- a German national living for many years in the UK sent to work by their UK employer for six months in Germany was liable to German Social Security, despite being paid by their UK employer
- A director of an EU subsidiary company who never set foot in that country was refused an A1 form even though the other country was charging local Social Security
- Unnecessarily bureaucratic and confusing forms - there are two subtly different application forms, CA3822 and CA8421 where it is difficult to see much daylight between them. The first is headed 'Employees temporarily posted to another Country in the EEA', the second is for people 'working in two or more EEA countries'. The small print confirms that the latter includes the UK, although this is not obvious from the guidance or the form.
HMRC have confirmed that they insist on a new application for each overseas assignment, although “it is causing them a lot of extra work”. It is causing severe problems for UK businesses who frequently send workers for short periods to EU/EEA countries (service engineers, technicians, sales staff attending trade fairs, etc.) – why not simply issue a certificate for 12 months?
What is the result?
Many UK workers now find themselves paying Social Security and UK National Insurance in two or more countries which is contrary to the letter, and intention, of the EU regulations. Although the UK Government has published a 'wish list' to largely maintain the existing arrangements following Brexit, it lacks in detail, and is obviously subject to agreement by the other EU states. This is despite us being only five months away from the current regulations potentially ending.
If HMRC are holding back on issuing the essential A1 forms because of uncertainty after March 2019, wouldn’t it help and be more transparent if they said so, and used simpler procedures, instead of using bureaucratic delaying tactics?
If you think any of the above may be applicable to you, please do not hesitate to contact your local UHY specialist to discuss your options.
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