The currently existing rules for the coordination of social security systems concluded between the United Kingdom and the EU countries - Regulation (EC) No. 883/2004 and its implementing provisions - remain in force until the 31st of December 2020 (i.e. until the end of the transition period).
Moreover, in accordance with the provisions of the Withdrawal Agreement, the above regulations will continue to apply after January 1, 2021 to a situation that is not changed or discontinued after the end of the transition period. However, new posting cases that do not start until 1 January 2021, will not be subject to the coordination rules any more. That will generate the risk in terms of insurance coverage or increased payroll costs. The above will be applicable unless there are other agreements made between Great Britain and the EU in this regard, and no bilateral agreement between Poland and Great Britain is concluded.
Transition period
In February 2020 the Withdrawal Agreement was concluded between the United Kingdom of Great Britain and Northern Ireland and the European Union and the European Atomic Energy Community (hereinafter the "Withdrawal Agreement").
Polish Social Security Authorities (further called as “ZUS”) published on its website that during the transition period (01/02/2020 - 31/12/2020) the applicable legislation for people who are in the situation relating to the United Kingdom will be established on the basis of the current rules. Therefore, obtaining the A1 certificates is possible at all times, and moreover, in certain cases, the period for which the A1 certificate will be issued may be extended beyond the date of the transition period, in line with the Withdrawal Agreement provisions.
Changes after 01.01.2020 r. – referring to new assignments
If an agreement, which also covers issues related to the social security coordination, is not signed between the Great Britain and the EU, any new legal situations between the Great Britain and Poland will be treated according to the rules currently applied to the so-called "third countries", i.e. countries other than EU, EEA, Switzerland or countries who concluded bilateral social security agreements with Poland.
Taking into account the practical approach of the Polish ZUS, individuals assigned from the UK to Poland after January 1, 2021 will not be obliged to pay contributions to the Polish social security system (because the UK, in such a case, will be treated as a non-contractual country). On the British side, in this case, obligatory social security contributions remain for the first 52 weeks of the secondment (if certain conditions are met).
In other words, individuals (working under British contracts) as a rule, will be subject to the social security contributions in the UK only during the first year of assignment. Later, they will be able to insure themselves voluntarily, otherwise they will not be insured in either country. A particularly important issue in this case will be the lack of health insurance coverage, which currently entitles to free medical services.
On the other hand, persons assigned from Poland to the UK will be subject, as a rule, to the UK social security contributions from the 1st working day in the UK, unless the UK insurance authorities issue guidelines according to which such persons will be exempt from the said contributions for the first 52 weeks (under the certain conditions). At the same time, such persons will remain insured in the Polish social security system throughout the whole secondment period.
Hence, employees posted from Poland to the UK will be exempt from the British contributions for the first year, provided that Great Britain introduces such an exemption, which means that they will be subject only to Polish contributions. However, after this period at the latest, their remuneration will be subject to social security coverage in both countries.
This will have a direct impact on the increase of payroll costs concerning employees posted from Poland to Great Britain.
Due to the possible lack of coordination regarding benefits from the social security insurance systems after December 31, 2020, the contribution periods completed in the UK will not cumulate with the contribution periods in Poland and other EU countries. Coordination will also not apply to the health insurance. The fact of contributing to the health insurance system in Poland will not entitle such a person to access the British health services during his/her stay in the UK (so far it was possible on the basis of the European Social Insurance Card or the S1 certificate). Simultaneously, individuals covered by the British health insurance system will not automatically be entitled to use the Polish health service.
Changes after 01/01/2021 – referring to the events that already start during the transition period
After January 1, 2021, the employees from the United Kingdom, continuously remaining in the one of the cases described in the provisions of the Withdrawal Agreement:
- who started their assignment to Poland before December 31, 2020 and still have the British A1 for a period beyond 2020. , will be exempt from social security contributions in Poland until the end of validity of this A1. Under certain conditions, the employer will also be able to obtain another A1 after this period, if the given assignment is extended;
- who already work in Poland and pay social security contributions here, will be subject to contributions in Poland (also after 1.1.2021). Discontinuation of the contribution may be obtained pursuant to Art. 16 of Regulation 883/2004.
Similarly, employees posted from Poland to the United Kingdom before January 1, 2021, holding an A1 certificate from ZUS for the period beyond the transition period, will remain covered by the obligatory Polish social security system throughout this period and will be exempt from the contribution to the obligatory social security system in the United Kingdom. This means that the situation of a person posted from Poland to Great Britain or from Great Britain to Poland in terms of social security will have different consequences depending on whether this situation is already ongoing, in 2020, or it will only start after January 1, 2021.
Tax consequences
Great Britain’s exit from the EU will not affect the current tax regulations of the Double Tax Treaty Agreement concluded between the Republic of Poland and the United Kingdom of Great Britain and Northern Ireland. Nevertheless, it should be underlined that the effect of the UK's exit from the EU brings the loss of some of the benefits resulting from the Polish personal income tax Act, the provisions of which in the current wording equate certain events taking place in the territory of the EU, EEA or Switzerland with events in the territory of Poland. Such preferences are, among others, housing relief (consisting in the expenditure of funds obtained from the sale of real estate for the taxpayer's own housing needs, which may be realized through the purchase of real estate located also in the EU, EEA or Switzerland), joint marriage tax settlement by spouses when at least one resides in the EU / EEA or Switzerland, or the possibility of deducting foreign social or health insurance contributions from income or tax in Poland. Maintaining the reliefs resulting from the tax act will require its amendment.
Necessary actions
In case of assignments that have already started, it is recommended to obtain as soon as possible the A1 certificates from the respective Social Insurance Institution, especially in a situation when secondments are to be continued also after January 1, 2021. Companies planning to post employees on assignments in 2021 may accelerate these activities, if it is business-related, so that they will start still in 2020. It is also important to monitor the development of legislative work, due to possible agreements between the United Kingdom and the European Community, which may ensure further coordination of social security systems.
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