Home or away post Brexit?

17 November 2016

Following the referendum in June, there is still considerable uncertainty surrounding how the UK’s vote to leave the EU will impact UK nationals living and working in the EU, the wider EEA and Switzerland (ie the ‘EU single market’). While nothing is certain at present and the shape of changes is only likely to become clear over the next two years, employees and their employers,and those who have retired or made a lifestyle choice to live in France, Spain or another single market country, will need to consider their options (whether forced or out of choice).

Immigration

There is no need for any immediate action as :

  • until the official exit date, UK nationals can continue to live and work in single market countries and this free access to live and work may, depending on the outcome of Brexit negotiations, continue to exist (possibly even for new UK migrants to those countries); and
  • any UK national who has been living and working in a single market country for more than five continuous years should generally qualify for permanent residence status in that country.

Currency fluctuations

  • As the value of sterling has fallen since the referendum, the value of salaries earned while on overseas assignment or of UK pensions received by those who have retired overseas may impact on the amount of income in local currency the individual has to live on.
  • UK employers seconding employees to overseas countries may have to consider introducing cost of living adjustments in some locations to encourage staff to go on assignment. They may also have to consider paying staff in the local country currency rather than sterling, which may not be in line with the company's international mobility policy.
  • Pensioners and others living off UK source income, such as rental income from UK properties or investments, may need to review their investment structures and look at hedging their exposure to currency fluctuations, as well as reviewing the level of their outgoings compared to income.

Income tax and social security

  • On exit from the EU, UK nationals living in single market countries may no longer be entitled to the same tax reliefs and allowances as other EEA nationals, which could increase the amount of tax paid in the country of residence. For employers, overseas employee assignments are likely to be more expensive if the individual is tax equalised, simply because the tax costs will increase.
  • Double tax agreements between the UK and the various single market countries are unlikely to change in the immediate future, so individuals should still be able to rely on these to avoid double taxation.
  • However, exit from the EEA social security system is likely to impact the ability of people to access benefits that they may have enjoyed previously. For example, contributions made in one EEA country generally count towards the years of contributions required to qualify for a state pension (UK or other EEA country) but this may change.

Do I stay? Or do I return?

Each individual will need to consider the pros and cons for them and their family of remaining overseas or returning to the UK, which will depend on much more than the issues identified above, including housing, schooling, quality of life etc. As with any international move, tax advice should be taken well in advance of any move, even if this is back to the individual's home country, to avoid any unpleasant and unintended consequences.

For more information, please get in touch with Karen Clark or your usual RSM contact.


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