Amidst a still unclear Brexit picture, recently there was a piece of good news for EU citizens living in the UK. Theresa May announced that the Government would be abolishing the £65 fee for individuals to apply for settled status in the UK after Brexit. This is particularly welcome news for contractors and freelancers, as many employers were offering to cover the cost for their workers, whereas the self-employed would have to find the money from their own pockets. This blog takes a closer look at the process of applying for settled status if you are a contractor or freelancer. As we’ve seen from the past month or two, almost everything about Brexit is still up for negotiation and subject to change, but here is the advice as it currently stands.
There are around 3.7 million EU nationals living in the UK, and an estimated 300,000 of these are self-employed.
Under Brexit, even a no-deal Brexit, EU citizens can stay in the UK under “free movement” rights until 31 December 2020. After this point, those wishing to continue living in the UK will need to apply for “settled status”. Anyone who has been “economically active” in the UK for five years or more is eligible to apply for settled status.
The idea of being economically active is an easy one to prove for those in regular employment – you’ll have employment contracts, employer statements and years of PAYE contributions to support your claim. But how do contractors and freelancers go about proving their status?
The first step is to keep a record of both your economic activity and your movements in and out of the UK. This will help you build up a picture of your residency and your work. This particularly applies if you work abroad a lot.
Paying taxes isn’t a definitive necessity of proving economic activity, but, as you can imagine, it is seen as a pretty strong indicator. This applies even if you are a freelancer earning below the tax thresholds – simply returning the form annually provides an official record of your economic activity.
EU law does recognise that income and work can be irregular for self-employed persons, and so your five years of economic activity don’t have to be consecutive. You can build up periods of activity that amount to five years, and cut out inactive periods when applying. The idea of economic activity is defined by EU law, not by HMRC, and as such is more flexible.
Any situation where you are not depending on the state for out-of-work benefits counts. For example, if you live off savings for a while or are otherwise self-sufficient, you can class this as being economically active. Claiming tax relief or other in-work benefits shouldn’t affect your claim.
EU law also, helpfully for contractors and freelancers, recognises that there is what they call “preparatory work” involved in being self-employed. This is stuff that isn’t billable to clients, but is all part of the work of running your own business, such as building a website, preparing accounts, maintaining client databases and marketing. All of these types of activity still count as being economically active, even if you’re not actually earning any money directly from it.
Any time where you were in the UK as a student also counts.
For contractors and freelancers who may have taken time out of work as maternity leave, up to 12 months leave during pregnancy and after childbirth can count towards their five years. Other “important reasons” for being out of work, such as serious illness, study, vocation training or an overseas work posting are also allowable as making up the five years as long as this is only once and does not exceed 12 months. Compulsory military service of any length is also allowable.
Although the system to apply for settled status is not yet fully open, one way to jump the queue is to apply now for your certificate of Permanent Residency. Plans up until now suggest that settled status applications from those with PR cards will be fast-tracked. However, this document is still subject to a £65 application fee, plus a charge of £19.20 to have your biometric information taken, so this is not a cheap option, and it will cease to apply once the settled status scheme kicks in.
If you’ve been in the UK for less than 5 years, you can apply for “temporary status”, which can lead to settled status once you have lived here for five years. All the advice above applies equally – if not more so – in this case, as you can put in the groundwork now in order to make your application as smooth as possible when the time comes.
Remember that “preparatory work” we talked about? Well, having the right cover in place is an excellent idea too. It won’t take you five years though – just five minutes on the phone to one of our friendly advisors and they’ll show you why Kingsbridge’s simple, compliant, comprehensive package is the right choice for you. Call now on 01242 808740.