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Brexit and Its Impact on Workforce Mobility 06.29.2016 | Laura Levenson

Conventional wisdom and experience dictate that saying you want to break up and actually doing it are two very different things. That’s why many people were genuinely surprised when the majority of UK citizens voted to support British departure from the EU in the recent referendum.

Although the intent to exit is now official, the full scope of what leaving the EU will entail is still unknown. Cancelling UK treaty obligations could be relatively easy, but negotiating new trading relationships, tax treaties and immigration rules and regulations could be much more difficult and take much longer, without any guarantee of success. In the interim, there are some things that are important to understand regarding the implications of the Brexit referendum, particularly in regard to workforce mobility.

Firstly, the referendum is not legally binding; it merely states an intention to exit the EU. The departure will take a minimum of two years once Article 50 is triggered and leading economic, political and legal experts estimate it could take up to 10 years to fully complete the transition.

For now, the political situation remains volatile. One of the biggest economic risks is a long wait between Britain’s exit and new trade arrangements. Germany and other EU countries have clearly stated that they are not willing to begin any trade talks until after Article 50 is triggered. The speculation is just beginning; facts and opinions will evolve over the next six months, but for our clients and assignees, it is critically important to avoid impulsive reactions to the situation.

Near term, the devaluation of the GBP is likely to cause some angst for active assignees especially UK assignees paid in home currency. Exchange rate data rarely responds immediately to this kind of volatility but we recommend consulting with your data provider as appropriate. For the short term, UK nationals holding residence cards in EU countries need not do anything. In EU countries where residence cards are not required, a residence card may become a requirement for British citizens legally employed in those countries in the future. Likewise, there may be
a similar registration process put in place for EU citizens residing in the UK, but currently there is no action required.

No changes related to income tax, CGT and corporate tax are anticipated, as Britain has always remained independent of the EU in these areas. Regulations surrounding VAT tax, however, may change, but again, not for at least two years and/or until the actual exit process takes place.

Similarly, it is likely that the process by which certificates of coverage eliminate double social taxation will stay in place; this is another area that will require future negotiation. It is always best practice to track all assignees’ locations and start and end dates, for security, tax and immigration compliance reasons. Companies are well advised to monitor current assignments of EU citizens in the UK and UK citizens in the EU, so that as announcements and rules are publicized, all relevant and necessary communication will reach the right audiences in a timely, efficient and effective manner.

According to Worldwide WERC’s Brexit Update for the Workforce Mobility Industry, UK financial institutions are concerned because the “passporting” rules that allow EU-headquartered banks to carry out business in other member states will cease to apply to the UK. Unless a new passporting arrangement is negotiated with the EU (and approved by all member states), UK financial institutions will be considering the need to set up new headquarters in EU locations. This will not, however, impact our ability to pay expenses and process allowances as your mobility provider.

Weichert is carefully monitoring the situation and with our leadership in the region, immigration, tax, and labor law partners, we will communicate on a regular basis with all of our clients as this historical landmark decision is implemented. For additional information please see Worldwide ERC’s Brexit Update.

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Written by Laura Levenson

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Laura Levenson is Global Practice Leader with Weichert Workforce Mobility’s Consulting group. She has worked in management capacities for workforce mobility and Big Four firms, and is well-versed in bringing clarity to the most pressing global talent deployment challenges. She brings over 20 years of experience to her role and is a frequent speaker on the global mobility conference circuit.

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