How Will Brexit Affect Contractors and Independent Consultants

Chris Andreou

March 3, 2021

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Contractors

Introduction

The United Kingdom left the European Union on 31 January 2020. In 2020, the EU and the UK reached an agreement on their new partnership. It sets out the rules that apply between the EU and the UK as of 1 January 2021. 

The rules cover aspects such as travel and border controls, trade in services, trade in goods, fair competition, social security, the transfer of personal data and more—a number of which may significantly impact contractors and independent consultants working in Europe and the UK.

In our article, we take a closer look at the key areas in which contractors and consultants will be affected:

Tax

VAT

We’ll be looking only at the B2B general rule for the supply of services, given that most independent consultants operate in the B2B sector. 

The B2B rule is that the supply is made where the customer is situated. If you’re supplying services to businesses located in the EU, the place of supply is outside of the UK—and as such, UK VAT is not chargeable. Independent professionals in the UK providing services to EU businesses do not need to charge VAT, and this remains unchanged after Brexit.   

Social security contributions

According to HMRC, contract workers may need to pay dual contributions to their country of origin and country of work, depending on where they’ll be working and how long they’ll be working abroad. 

As a self-employed individual, you will usually pay NICs in the UK if you’re working abroad temporarily in the EU, Iceland, Liechtenstein, Norway or Switzerland. You’ll need to obtain a certificate of continuing liability as proof that you’re not required to pay social security contributions in the country you’re working in. To apply for the certificate, use form CA3837.

Freedom of movement

The end to the freedom of movement is one of the most significant impacts of Brexit. Moving forward, UK independent professionals can no longer work freely between and among the 28 member states of the EU. 

There are now additional considerations to account for, including visas, checking if your professional qualifications are recognised in the EU and notifying HMRC that you’ll be working in the region. 

Visas: 

A visa, work permit or other documentation may be required to carry out contract work in the EU, Switzerland, Norway, Iceland or Liechtenstein if you’re staying for longer than 90 days in a 180-period. You’ll need to check the entry requirements and rules of the country you’re travelling to find out if you need a visa or work permit. 

If you’re performing contract work in the above-mentioned locations and are staying for less than 90 days in a 180-day period, you may be able to carry out certain activities—such as attending business meetings—without obtaining a visa or work permit. 

Qualifications: 

Depending on the type of service you provide, you may need to check if your qualifications are recognised in the EU. 

Notify HMRC:

You may need to notify HMRC that you’re working abroad.

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Data transfer and GDPR

The European Union Commission issued its draft adequacy decision for data flows between the European Union (EU) and United Kingdom (UK) on February 19 2021, confirming its acceptance that UK data protection levels are adequate.   

Presently, the decision is pending review by the European Data Protection Board. A press release from the European Union reported that the European Commission will “request the green light from Member States' representatives in the comitology procedure”, following which the “European Commission could adopt the final adequacy decisions for the UK”.

This is welcome news for independent consultants and businesses. If the decision is adopted, the free flow of data between the EU and UK may continue without the need for additional provisions, which can be costly and time-consuming to implement. According to business publication diginomica, the average compliance costs for UK companies may amount to a sizable sum—£3,000 for a micro business, and £10,000 for a small business—if the agreement were to fall through.

Contract work and opportunities

While Brexit brings many new uncertainties, it is important for contractors and independent consultants to look quickly at, and take advantage of the opportunities that arise. 

On one hand, the restrictions in mobility may cause companies in the EU to reconsider the need to engage UK professionals for contract work. This could result in the termination or renegotiation of contracts for contractors. 

But it’s not all gloom and doom. The way we work has changed radically over the past year as a result of the COVID-10 pandemic. As remote working becomes the new normal, this presents an opportunity for consultants to continue contracting for businesses outside the UK—without the need to be always present physically.

Consulting network Comatch’s UK&I Managing Director Charlotte Gregson explains: “Consultants have traditionally worked long hours and travelled considerably as the job has demanded. The legacy of 2020… has not only challenged this established view but will lead to a rebuttal of the idea that the ideal consultant is necessarily the one that is present and available in-location.”

“There will always be a certain demand for travel–both from the business and consultant – but the image that this is the only way to go will hopefully change with the post-Covid consultant able to deliver the high-quality results of pre-pandemic, but in a different manner.”

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