What does Brexit mean for UK freelancers and contractors?

With a trade deal agreed at the eleventh hour and the UK’s departure from the European Union now complete, everyone is in a better position to understand what Brexit might actually mean for businesses and in turn, freelancers and contractors.

On this page, which will be continuously updated with the latest information, we explain how things look to have changed for independent workers who have business interests in Europe.

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Living in Europe

Having left the Single Market, which allows EU states to enjoy the free movement of goods, services and people, the rules for living in a European country as a UK citizen are different.

If you were resident in an EU country before 1st January 2021, broadly speaking you will retain the same rights to work, study, travel and access benefits. In other words, not a huge amount should change for you in theory. You are, however, advised to make sure that you are correctly registered as a resident in this country. The government website contains more information.

As expected, things become more complicated if you are not a resident of an EU country - for example, if you currently live in the UK but would like to move to Europe. UK nationals need to secure a visa if they want to remain in an EU state for over 90 days in a 180-period.

Due to the Common Travel Area, which predates the EU, there are no restrictions on freedom of movement between the UK and Ireland. You continue to have the right to live and work in Ireland.

Given visa eligibility differs from country to country, check the government website before you make concrete plans.

Travelling and staying in Europe for work

It’s a similar story for contractors who are required to travel to EEA countries on business, whether that’s to work onsite or even just meet clients.

You’ll need a visa if the following applies:

You plan to stay longer than 90 days in a 180-day period
You’re carrying out a contract to provide a service to a client in a country which your employer has no presence (this seems likely to relate to employees)
You’re delivering your services in another country as a self-employed person (this impacts contractors)

So, the cut and thrust of it is that contractors working in the EU will need a visa, not only to travel on business, but also perform work there.

For more on working in Europe and to check entry requirements for a specific country, please click here.

Providing services from the UK to businesses in the EU

Lots of UK-based contractors who sell digital services - whether IT, marketing or design - to businesses in Europe from the UK are wondering what the implications of Brexit are.

From what we understand so far, the trade deal struck focuses mainly on the rules for goods crossing borders, not services. The agreement reached means there are no taxes or limits on the amount of goods that can be traded between the UK and EU countries. This is generally seen as good news, and means companies importing or exporting products shouldn’t see their costs rise directly as a result of Brexit.

However, when it comes to the provision of services, things aren’t so cut and dried. The government advises that UK businesses - which includes limited company contractors - should check the rules for the country they will be selling their services in. You can do this here.

If you had a client in Germany, for example, who you worked remotely with from the UK, you’ll

still need to abide by the country’s specific rules. This could include getting authorisation or a licence to provide the service, complying with local business regulations, and even restrictions on working in some sectors.

What about VAT?

Broadly speaking, the supply of services to customers in the EU from 1st January 2021 is treated the same as those to any customer outside the EU. The VAT treatment will continue to be covered by the VAT ‘place of supply’ rules but with the following exceptions:

For UK businesses supplying digital services to non-business customers in the EU, the ‘place of supply’ continues to be where the customer resides. This means VAT on those services is due in the EU member state in which the customer resides.

For UK businesses supplying insurance and financial services, the input VAT deduction rules changed from 1st January 2021. Supplies that were previously exempt became outside the scope of recovery, thereby aligning with the existing rules for supplies of such services to customers outside the EU.

EC Sales Lists will no longer need to be completed for supplies of services to businesses in the EU.

In summary, if you are supplying services from the UK to the EU (use and enjoyment is in the EU) then generally this will fall outside of the scope of UK VAT. You can read additional guidance on the government website.

Question marks over recognition of qualifications

Along with this, professional qualifications gained in the UK aren’t automatically recognised in the EU anymore. So locum doctors, freelance architects, self-employed lawyers, accountants and even chefs may need to check that their qualification is recognised - something they should check before taking on a contract in Europe.

As part of the UK’s comprehensive free trade agreement, authorities responsible for professional qualifications in the UK and EU member states can submit joint recommendations to the UK-EU Partnership Council for profession-specific arrangements.

However, there are unique rules for lawyers and auditors, so if you intend to provide these services you will need to check the government guidance.

Until mutual recognition agreements have been put in place, UK-qualified professionals should continue following government advice on using their qualifications in an EU member state.

While this looks set to make working in the EU for UK professionals slightly more difficult at least in the short term, both parties are said to be keen on resolving the issue.

National Insurance contributions when working in the EU

Whether you’ll need to make National Insurance (NI) contributions in the UK or the country in which you provide your services depends on your circumstances and where it is that you’re working. Temporary workers, such as contractors, may be able to get a certificate or document from HMRC to continue paying NI in the UK, not in the country where they work.

If you meet the following criteria, you should apply for a certificate or document that allows you to pay NI in the UK:

UK residents who started working in the EU (or Iceland, Liechtenstein, Norway or Switzerland) before 1st January 2021 and have been working there since
People with dual nationality, one of which is a country in the EU, Iceland, Liechtenstein, Norway or Switzerland
A ‘multi-state worker’, meaning that you worked in two or more countries of the UK, EU, Norway, Iceland, Switzerland or Liechtenstein before 1st January 2021 and continue to do so, but work predominantly in the UK.

You’ll also only pay NI in the UK if you’re an Irish national or any resident in the UK who works in Ireland or a multi-state worker operating in the UK and one or more EU countries.

If you’re working temporarily in an EU country where the ‘detached worker’ rules apply, you should also contact HMRC for confirmation that you can pay NI in the UK. At the time of writing, only Austria, Hungary, Portugal and Sweden have agreed to the ‘detached worker’ rules, so if you work elsewhere you’ll need to meet the qualifying criteria above. To learn more about paying NI when working in the EU, visit the government website.

GDPR implications

There will be no changes to GDPR rules for 6 months from 1st January 2021, with the free flow of data between the UK and EU countries allowed to continue for this period of time. Given the UK already has in place its own domestic GDPR rules (which are said to be ‘exactly the same’ as the EU version), the unrestricted sending and receiving of data can continue if the EU grants the UK something called an “adequacy decision” before June 2021. For more on GDPR, head to the government website.