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GUEST ARTICLE: Brexit And The Implications For Family Offices
Charles Avens
Druces
12 September 2016
The decision by UK voters in late June to vote against continued membership of the European Union sent shockwaves around markets and the political world, confounding pollsters – yet again – and upsetting right-thinking opinion, including opinion in the City and wider financial world. Conventional wisdom – which is often wrong – has it that the loss of EU membership will be a net blow to the UK’s financial services industry, although more recently the economic data seems to suggest that life away from the embrace of Brussels might not be as bleak as feared. Regardless of the pros and cons and the continuing arguments, this publication will continue to track how departure from the EU will affect the wealth management sector. For example, there is the potential impact on non-domiciled residents in the UK (see here). One sub-sector of wealth management is the family offices area. How will Brexit affect these often discreet and little-understood institutions? What particular questions will the heads of family offices have about Brexit and the new world they face? Tackling some of these questions, Charles Avens of Druces LLP’s employment and immigration team, writes here. As is always the case, the editors of this publication do not necessarily endorse all the views of guest contributors and we invite readers to respond. They can contact us at tom.burroughes@wealthbriefing.com or +44 207 148 0178. Employers and EU nationals alike are anxiously awaiting confirmation that their right to live and work it the UK will be preserved when Britain finally withdraws from the EU. This is drawn into sharp relief by a report from the Social Market Foundation, an independent UK public policy think-tank, released in July 2016. It suggests that more than half a million of the 3.6 million EU residents currently living in the UK may not have qualified for permanent residency by the time of Brexit. Protecting the rights of EU nationals is now a number one priority for employers and individuals – unsurprisingly immigration lawyers have been flooded with questions since 24 June. Family offices must consider how the changing European Union framework will affect their operations: goods, capital, services and perhaps most importantly, people. Any family office employing EU nationals in the UK should consider taking urgent action to review and protect their position for the future. The status quo At this stage, the following points are clear: 1, Any EU national currently living in the UK and exercising Treaty rights, e.g. by working, will have the right to remain in the UK exercising EU Treaty rights until the UK leaves the EU; and 2, Any EU national wishing to come to the UK between now and the time the UK leaves the EU will also have the right to reside in the UK and exercise Treaty rights. Securing long-term security In any event, family offices wishing to remain in the UK should consider the following steps to ensure that their status, or that of their employees, is protected as far as possible. Two possibilities currently exist: EEA Permanent Residence Card The process costs £65 in government fees, with £65 for each family member applying with the main applicant and is a lengthy process currently taking at least six months and probably longer in the future in view of the likely flood of applications. EEA Residence Card However, whether or not these individuals will be entitled to obtain permanent residence rights in the UK if their five years’ residence expires after the UK leaves the EU, or indeed after service of the Article 50 notice, is both a matter of negotiation between the UK and the EU. This will also more than likely be a matter for litigation in the courts should the UK government take a hard line view on this. Exercising Treaty rights But a warning - substantial gaps in employment are likely to lead to the refusal of an application or an EEA Permanent Residence card unless the employee is able to show that he has qualified under one of the other EU Treaty Rights, e.g. self-sufficiency, during any period when he was not employed. Many applicants believe that the application for an EEA Permanent Residence card is a simple process, but this is not necessarily the case. This uncertainty is clearly greatly affecting EU nationals working and residing in the UK as well as the abundance of businesses who rely on their services; family offices can only hope that the UK government is in a position to clarify its thoughts as to the future rights of EU nationals in the UK as soon as possible.
The vote to leave the EU appears to have taken everyone by surprise, including members of the UK government. Many observers have been amazed by the clear lack of preparation by the UK government for a possible Brexit vote, despite the closeness of the opinion polls.
It appears that, until serious negotiations are at least started (and possibly completed) between the UK government and the EU, it will be impossible to say for certain what the position of an individual EU national living in the UK will be once the UK finally leaves the European Union. However, following the recent Cabinet meeting at Chequers, it appears clear that restrictions on EU nationals coming to the UK will certainly be imposed after the UK leaves the EU.
There may well be a considerable difference in the long-term right to stay in the UK of EU nationals who can prove that they have resided in and exercised Treaty rights prior to the Brexit vote. It is certainly possible, however, and there are strong legal arguments for this, that the critical cut-off point will not be the date of the referendum vote, but could be the date of service of the Article 50 Notice by the UK government, or indeed possibly the date of final departure from the European Union.
Firstly, any EU national who has lived and exercised Treaty rights in the UK for at least five years is entitled to apply for what is called an EEA Permanent Residence Card. This is a card granting permanent residence rights and anyone granted such a card cannot be required to leave the UK, despite the UK leaving the EU, provided that the conditions of the card continue to be met. Any individual who is in this position, or any company employing such an individual, should be advised to apply for an EEA Permanent Residence Card as swiftly as possible.
For those individuals who have not completed five years of residence in the UK exercising treaty rights, the best advice is to apply for an EEA Residence Card using the form EEA (QP). Any EU national who is currently exercising treaty rights in the UK with their family is entitled to apply for such a card and again, should do so, in order to be able to produce a document proving right of residence in the UK.
However, it is most important to understand that, by simply living in the UK, an EU national is not exercising treaty rights. Treaty rights can be exercised by working, looking for work in some circumstances, studying, or showing self-sufficiency. Conditions are attached to all these statuses. In particular, to qualify for an EEA Permanent Residence card on the basis of working, it is normally necessary to prove that the EU national has worked for most of the five-year period in the UK. Short periods of unemployment are accepted, particularly where an employee has been a job seeker.