Although Article 50 has yet to be triggered it now looks likely to take place by March 2017. One of the main immediate concerns for those in financial services is the impact on immigration. There has been a lot of uncertainty, following the referendum result, for European Economic Area (EEA) nationals and their employers as to what their position is in the UK and what will happen when the UK exits the EU.
The UK’s current position as a member of the EU
The UK is still currently a member of the EU and free movement principles will continue to apply throughout the EEA until the UK formally leaves the EU.
The UK can start proceedings to leave the EU by giving notice under Article 50 of the EU Treaty. Then there is a two year negotiation period, which could be extended even further with agreement of all other 27 member states.
The UK government has indicated that notice is likely to be triggered by March 2017. Therefore, the earliest the UK would leave the EU is 2019.
Employing staff from Europe
Regardless of how long it takes to invoke Article 50, a major concern is the question of what will happen to the right to employ European nationals. Most businesses in financial services rely heavily on European workers to meet their workforce needs.
Until we exit it is business as usual and there is no change to free movement. The question is what happens when we exit and how to prepare for this.
The UK government has made it clear that it will seek to introduce measures to protect its borders and restrict the rights of free movement within the EEA.
If a work permit scheme is applied to EEA workers, it will be harder for many employers to recruit the staff they need.
The Chancellor, Philip Hammond, has indicated that there would be an exemption from immigration control for European bankers and skilled businessmen and women.
Whilst this is welcome news the practicalities of how this would operate will need to be ironed out to ensure these employees can freely and quickly travel to the UK without the need to spend weeks or months applying for a document to evidence their free movement and hours queuing at the border.
Preparing for Brexit
Although there is some uncertainty about what the UK can negotiate with the EU and how these exemptions for bankers and highly skilled staff will operate, there are certain steps employers can take now to protect the rights of their EEA employees working in the UK and the British employees working in the EEA.
Employees who have worked for 5 years in the UK
Employees should apply for permanent residence if they have lived and worked in the UK for 5 years (it may also be possible to apply if they have lived in the UK for 5 years but not worked for the full period).
Permanent residence is confirmation that the EEA national has indefinite leave to remain in the UK and they are a permanent resident of the UK. It would be very difficult for the UK to go back on this status and so this means when the UK exits the EU the EEA national will be a permanent resident of the UK recognised under UK law. They will therefore not be subject to any immigration control on their right to reside and work in the UK.
It is also possible to acquire British citizenship through residence. The process is called ‘naturalisation’ and requires applicants to meet residency requirements.
Taking British citizenship does not mean the place of domicile is changed so in terms of tax there are very few consequences. Most EEA countries allow for dual nationality as does the UK. However, some countries do restrict dual nationality (e.g. Norway and the Netherlands) so applicants should always check that they can acquire another nationality with their own national authorities.
Employees who have not spent 5 Years in the UK
It is advisable for EEA national employees to apply for a document called an EEA Registration Certificate. It confirms their status under EU law and that they have a right to reside and work without immigration control.
When the UK exits the EU it makes it easier to show that they were exercising rights under EU law pre the exit and therefore should benefit from any transitional arrangements in place to prevent those living in the UK before a certain date to continue without being subject to immigration control.
Also, if the UK implements a cut off for when transitional arrangements will apply this will help show which group they are in. The Government has talked about introducing a cut off for possible transitional arrangements.
What about British nationals employed in the EEA?
British citizens who are living and working in another EEA member state should be able to qualify for permanent residence in the same way an EEA national would qualify in the UK. The process will vary slightly from country to country but the principles are the same.
It may also be possible for the British national to acquire nationality in that country based on their residence. Nationality law does differ from country to country and is not regulated by the UK but in most EEA countries it is usually possible to acquire citizenship after 5 or 6 years residency.
Those British nationals with ancestry of another EEA country might able to acquire a citizenship e.g. an Irish born grandparent.