Brexit and Its Effect on Contractors

Kevin Austin of Access Financial, an international payroll and accountancy firm, writes about how a general election could begin to reveal what the UK’s relationship with the European Union will be like in the future. According to an announcement made by Theresa May last month, the general election will be held on the 8th of June. Kevin Austin also discusses how the election and Brexit will affect contractors.

The EU’s negotiating stance may weaken if the Conservatives win a significant amount of votes, giving them increased authority to enforce Brexit. From this, a compromising agreement may be brought up to lessen the damage Brexit may inflict onto both parties. The agreement will occur because many members of the EU want the UK to retract their decision to leave the Union. A poll among contractors show that 44% of them share similar views and hopes as the members of the EU.

This opinion is especially strong among contractors working in the IT sector and a report indicates that contractors in this sector are more inclined to support the idea of a second referendum.

The Deals of the Divorce

Members of the EU believe Brexit may be less harsh if the agreement would negatively impact Britain seriously. French President Emmanuel Marcon is among the member of the EU who has this opinion, considering the notion of UK leaving the Union a crime.

Despite the attention it’s getting, Brexit will not be the focus of political campaigns in the following weeks, especially if businesses get their say in it. The business community maintain that while Brexit is an important issue, it should not get top priority. They say that other issues such as digital connectivity should also be equally focussed on during the campaigning period. It is assumed that contractors in the IT sector would share the same views but the feedback sent to us suggest differently.

A considerable number of British contractors working with the EU have sent us many questions since the results of the referendum released last June. The enquiries reflect their worries regarding their residency status as many of them are working in different countries, an opportunity that was the main allure of a career in contracting. We are obliged to give them the facts, which is that it would maintain status quo. However, end-users and agencies will begin considering the beneficial differences between British contractors against contractors from other nations under the EU as the divorce date approaches.

Immigration After Brexit

Brexit doesn’t guarantee the termination of contracting opportunities in the EU for British contractors, regardless of the negotiations between the EU and the UK. It is considerably dependant on the type of trade deal agreed upon by the two parties, which would include the permeability of EU nations’ borders for British citizens and vice versa. Currently, there are no solid details about Brexit. However, the letter to the President of the European Council from Theresa May gives many clues as to the prospect of the future relationship between the UK and EU.

In the letter, the importance of liberal and democratic values is highlighted. This indicates that though members of the public have claimed that Brexit may be an action against globalisation, the claims may not be true. It is even suggested by foreign secretary Boris Johnson that citizens of the EU and the UK might still easily travel between countries even after the divorce date in March 2019, a notion very welcome by contractors in all sectors.

However, Mrs May says that she would reduce the number of immigrations to less than 100,000 if she is elected. The claim invites many questions which would greatly impact contractors. Subjects of the questions include the changes that will be made to the UK’s immigration system and work permits.

Mrs May suggests that there will be a halfway arrangement between the UK and the EU, describing that they will maintain a close relationship, more than the relationship between the EU and non-EU nations, but that border permeability will not be as free as those among EU nations. The chances of this phenomenon occurring depends on how well received Mrs May is to the members of the EU, but a leaked account of her meeting with the boss of EU Commission suggests that she is not.

A possible option the UK could consider is adopting an immigration system similar to the KMR in the Netherlands. It is currently the most efficient and flexible immigration system in the EU. A regime that follows the KMR model would grant the government of the UK some control over contractors while not being too big of an obstacle, allowing the contractors in highly skilled sectors have relative freedom to work across Europe. The new immigration system is more likely to limit the movements of unskilled workers.

Brexit on Limited Company Contractors

Another option the UK could consider is the point-based system they currently apply to migrants coming from non-EU nations. This system requires employers to try and hire local recruits before they can apply for work permits. An exception is made for occupations that are on the Shortage Occupation List. Some professions related to IT are currently on that list, including specialists in cyber security and data scientists.

The number of occupations on the list is likely to increase as the immigration of skilled workers from the EU are restricted.

Whether they work under a limited company or an umbrella company has no effect on a contractor’s eligibility for a work permit. This means that significant change is unlikely to affect contractors working in limited companies, which is good news to them.

However, a little persuasion may be needed to convince readers of an article that limited company usage will not change after Brexit. The article is about a contractor questioning their ability to work in France after the divorce. The tax regime in France makes the country a unique case in the EU as it results in the country seem less desirable for a British contractor to work there.

In other words, it is not expected that contractors working in limited companies are going to be more handicapped than other British contractors because the work permits do not differ between different corporate structures. The important point is that how will Brexit affect the difficulty in obtaining a work permit and the limits to international movement allowed by the permit. It is our belief that post-Brexit, British contractors will be considered foreign workers, therefore requiring a permit to work.

In summary, Brexit will bring UK workers slight disadvantages when they try to find work within the EU. A redeeming factor of Brexit is that the devaluation of the sterling pound it caused may make British workers more attractive to foreign employers. The currency devaluation also would attract international businesses to set up headquarters and offices in the United Kingdom. Many tech companies have already announced their intentions to invest in the UK. These companies include Amazon, Facebook, Google, and Snapchat.

Limited Company Contractor are an advisory service for contractors and business owners and provide impartial support on many aspects including payroll, IR35, insurances, banking, pensions, finance, mortgages, wills, estate planning, savings and investments. For further information, contact one of our team on 020 3823 9499 or [email protected] and we will be pleased to help.