The recently finalised UK–India Free Trade Agreement (FTA) represents a significant development in bilateral trade relations. This comprehensive agreement encompasses various sectors and introduces specific provisions affecting workers’ taxation and access to public services. This analysis aims to provide clarity on the core components of the agreement, its economic impact, and the implications for workers, particularly concerning taxation and access to the National Health Service (NHS).
Core Components of the Agreement
- Tariff Reductions: India has committed to reducing tariffs on 90% of British exports. Notably, tariffs on Scotch whisky and gin will decrease from 150% to 75%, eventually reaching 40% over ten years. Automotive tariffs will fall from over 100% to 10% under a quota system.
- Market Access: The agreement grants UK companies access to India’s government procurement market, allowing them to bid for approximately 40,000 tenders annually, valued at around £38 billion.
- Economic Impact: The UK government estimates that the deal will boost bilateral trade by £25.5 billion and increase the UK’s GDP by £4.8 billion annually by 2040.
Taxation and National Insurance Provisions
A focal point of the agreement is the “Double Contributions Convention,” which addresses social security contributions for workers temporarily assigned between the two countries.
- Scope of Exemption: Under this convention, Indian workers seconded to the UK for up to three years will be exempt from paying UK National Insurance (NI) contributions. Conversely, UK workers assigned to India will continue to pay into the UK system and be exempt from Indian social security levies.
- Applicability: This exemption specifically applies to inter-company transfers and does not extend to all Indian workers in the UK.
- Additional Obligations: Despite the NI exemption, Indian workers in the UK will still be subject to UK income tax and the NHS health surcharge. They will not be eligible for UK social security benefits during the exemption period.
Access to the NHS and Health Surcharge
Indian workers temporarily assigned to the UK under the FTA will be required to pay the Immigration Health Surcharge (IHS) as part of their visa application. The current IHS rate is £1,035 per year for most visa categories, paid upfront for the duration of the visa. Payment of the IHS grants access to NHS services on a similar basis to UK residents, excluding certain services like assisted conception. (nhs.uk+5RCN+5GOV.UK) (+5Staff Immigration+5Research Briefings+5Wikipedia) (+5RCN+2nhs.uk+2GOV.UK+2)
It’s important to note that while the IHS provides access to NHS services, it does not cover all healthcare costs. For instance, prescription charges, dental treatment, and eye care may still incur additional costs. Therefore, some individuals may choose to obtain additional private health insurance to cover these expenses. GOV.UK
Travel Insurance Considerations
While the IHS provides access to NHS services, it is advisable for Indian workers and other foreign nationals to consider obtaining comprehensive travel insurance. This is particularly relevant for services not covered by the NHS, such as repatriation, private healthcare, or treatment during short trips outside the UK. Travel insurance can provide additional financial protection and peace of mind during the assignment period.
Political and Public Response
The NI exemption has elicited varied reactions:
- Government’s Position: Trade Secretary Jonathan Reynolds emphasised that such agreements are standard practice, citing similar arrangements with over 50 countries. He asserted that the deal would not undercut British workers and would contribute positively to the UK economy.
- Opposition Critique: Critics, including Conservative MP Kemi Badenoch and Reform UK leader Nigel Farage, have labelled the exemption a “two-tier tax system,” arguing it disadvantages British workers and businesses.
- Business Community: The Confederation of British Industry welcomed the agreement, highlighting its potential to enhance market access and economic growth.
Conclusion
The UK–India FTA represents a significant development in bilateral trade relations, offering substantial economic benefits through tariff reductions and market access. The inclusion of the NI exemption for certain Indian workers aligns with international practices but has sparked domestic debate over its implications for British workers. As the agreement moves towards implementation, ongoing scrutiny and discussions are expected regarding its broader impact on the UK economy and labour market.
Let’s put this into some form of context without political spin.
Under the UK–India Free Trade Agreement (FTA), specific provisions govern the temporary relocation of workers between the two countries. These provisions are designed to facilitate business operations while maintaining the integrity of each nation’s immigration and labour policies.
Eligibility and Restrictions for Indian Workers in the UK
The FTA includes a social security agreement that exempts certain Indian workers from paying UK National Insurance contributions for up to three years. This exemption applies specifically to employees temporarily transferred within the same company, known as intra-company transferees. These workers must be on assignments that do not exceed three years and are not intended to lead to permanent settlement in the UK. The exemption is reciprocal, with UK workers in India receiving similar treatment. (Reuters)
Importantly, this exemption does not extend to all Indian nationals seeking employment in the UK. It is limited to intra-company transfers and does not apply to individuals entering the UK labour market through other visa routes. The UK government has maintained its existing immigration policies, and the FTA does not introduce new pathways for permanent employment or residency. (UK India Business Council)
Visa Quotas and Employer Limitations
The agreement allows for a modest increase in the number of Indian professionals eligible to work in the UK under specific visa categories. Reports indicate that the UK has agreed to approximately 100 additional visas annually for Indian workers. These visas are subject to existing immigration controls, including employer sponsorship requirements and adherence to salary thresholds. (Latest news & breaking headlines)
Employers seeking to transfer Indian employees to the UK must be registered as licensed sponsors and comply with the UK’s immigration regulations. There are no publicly disclosed caps on the number of intra-company transferees per employer; however, each application is assessed individually to ensure compliance with the established criteria.(UK India Business Council)
Post-Assignment Residency Prospects
The FTA’s provisions for intra-company transferees are explicitly designed for temporary assignments and do not confer eligibility for permanent residency in the UK. After the three-year exemption period, these workers are expected to return to their home country. Should an individual wish to remain in the UK beyond this period, they would need to apply through standard immigration channels, meeting all the requisite criteria, including salary thresholds and sponsorship requirements. (Financial Times)
Final Comments.
The UK–India FTA facilitates temporary business mobility through specific provisions for intra-company transferees, offering a National Insurance exemption for up to three years. These measures are tightly regulated, with clear limitations on eligibility and duration, and do not provide a pathway to permanent residency. Employers and employees must adhere to existing immigration laws and processes for any long-term employment or settlement considerations.