EU Nationals in the UK – what should they be doing now?

Written on 18 Jul 2016

No immediate changes to the status of EU Nationals

Until the UK formally leaves the EU, there will be no changes to the status of EU Nationals living in the UK.  The decision about when to trigger Article 50 and start the formal process of leaving the EU will be for the UK’s new Prime Minister, although we do not anticipate that Article 50 will be triggered until the beginning of 2017 at the earliest. The UK remains a member of the EU until Article 50 negotiations have concluded, which could take two years or more.

When we do leave the EU, we fully expect that the legal status of EU and EEA nationals living in the UK, and that of UK nationals in EU member states, will be properly protected and mirror each other.

However, until Article 50 negotiations are completed, the detailed terms of the status of EU Nationals currently living and working in the UK and the conditions that might be attached to that status are unknown.  Accordingly, EU and EEA nationals living in  the UK should think now about taking steps to secure residency rights under domestic UK law.

Avoiding Brexit uncertainty – securing residency rights under UK law

The aim for many EU Nationals currently living and working in the UK will be to secure their rights to continue to do so post-Brexit under UK law, as opposed to EU law. For most EU nationals, this is a two stage process – the second of which may not always be recommended.

The first step – obtaining “Indefinite Leave to Remain”

First, it is important to secure “Indefinite Leave to Remain” (also known as “Permanent Leave to Remain”). This means that there are no immigration restrictions on a person’s ability to live or work in the UK.  However, unlike citizenship, this status can be lost by leaving the UK for a two year period.

EU nationals who have lived continuously and lawfully in the UK for at least five years will usually qualify for Indefinite Leave to Remain. In order to do so, they will need to show an “exercise of Treaty Rights” – most easily proven by employment but also by self-employment, studying or by demonstrating self-sufficiency (the latter being particularly relevant to HNW individuals and retirees).

Most adults should be able to satisfy this test without difficulty but any absence from the UK of more than 6 months (either in a single period or when taken in aggregate during a single year) may cause problems. Previously, there was no requirement to evidence this status, however post-Brexit this evidence will be helpful. Furthermore, since November 2015, the UK government has insisted on EU nationals having a Permanent Residence Permit before being able to apply for a UK passport under the second step of “Naturalisation”.

Whilst there is no need to panic, it is worth making Permanent Residence Permit applications sooner rather than later.  Under current processing times, applications can take 6 months. As the Brexit date draws nearer and more applications are submitted, those times will only increase and passports need to be submitted as part of the application process.

The second step – “Naturalisation” and obtaining a UK passport

Naturalisation is the formal application needed to secure a UK passport.  This requires much of the same information as the Permanent Residence Permit application, but with the addition of “good character” requirements.  Unless an EU national is married to a UK national, the Permanent Residence Permit needs to have been held for 12 months before an application for Naturalisation can be submitted.  However, we are usually able to “backdate” Permanent Residence status so that if an EU national has been in the UK for 6 years or more, we can apply for Naturalisation as soon as the Permanent Residence Permit is issued.

Given that Naturalisation carries a requirement that the individual makes the UK their main home and confers UK nationality, it is vital that applicants take advice on their tax status before applying as well as assessing whether their current nationality will be affected.  Not all countries allow dual nationality and it can lead to automatic cessation of nationality in some EU/EEA countries such as Austria, the Netherlands and Norway.

Naturalisation may affect HNW individuals who currently claim the remittance basis of taxation, by leading them to acquire a domicile of choice in the UK which would result in the loss of this often extremely beneficial regime.  This is not necessarily the case, and the risks of potentially losing this tax status will need to be set against an individual’s desire to secure their UK residence irrespective of final Brexit terms.

Our Private Wealth team can provide advice on all aspects of securing rights to live and work in the UK, including the impact on individual tax positions.  For more information, please contact any of our experts below.