Early stage growth

Trading services with the EU post-Brexit

Regulations on exporting services to the European Union remain largely unaffected by Britain’s departure – here’s how to take advantage of this rich opportunity

Trading services with the EU post-Brexit

Regulations on exporting services to the European Union remain largely unaffected by Britain’s departure – here’s how to take advantage of this rich opportunity

Trading services with the EU post-Brexit

Regulations on exporting services to the European Union remain largely unaffected by Britain’s departure – here’s how to take advantage of this rich opportunity

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While the focus of the post-Brexit trade deal between Britain and the European Union has been almost exclusively on the trade of goods, there are other aspects of the agreement that could be critical to the future success of many small businesses (SMEs).

If you own or run an SME that supplies services from the UK to the EU – or one that buys services from an EU company – the good news is that there has not been too much disruption to business as usual.

Unlike trading in goods, which the government’s EU Goods Sub-Committee described as “not simple” under the EU-UK Trade and Cooperation Agreement (TCA)1, the trade of services remains largely unaffected. This provides an exciting growth opportunity for early-stage businesses looking to expand their customer base as the global economy emerges from the coronavirus pandemic.

However, despite the regulations on trading services remaining relatively unchanged, it does not mean they are any less complicated. The result is that a business that was already supplying services to the EU should be well positioned to continue to do so – and expand its provision, should it see an opportunity. Meanwhile, if your SME is looking to start supplying or buying services, then it pays to take expert advice.

“The existing rules [before Brexit] for the supply of services to the EU were by no means straightforward,” says Paul Taddei, an Associate and Chartered Accountant at the accountancy firm Johnston Smillie. “Any business that was already supplying services to customers outside the UK before 1 January 2021 is likely to be well placed to adapt to the new regime.”

The lack of attention on the post-Brexit environment for trading services is surprising, given the service sector’s fundamental importance to the UK economy. In the period January to March 2021, the service industry accounted for 80% of the country’s total economic output and 82% of its domestic employment, according to government figures.2 Furthermore, the UK is the world’s second-largest exporter of services and the EU is the largest recipient, receiving the equivalent of 40% of the UK’s total services exports.3 These include sectors such as digital, financial, legal and business services.

Clearly, this presents a big opportunity for your business if you can provide the type of services that are in demand in the EU. Among the main considerations are new VAT rules for UK businesses supplying services to Europe. Here are some key factors to consider.

1. Business to Business (B2B) services: No UK VAT chargeable for services supplied to businesses outside of the UK, including the EU.

2. Business to Consumer (B2C): VAT is applied at the place of supply, which is the UK for a British business supplying B2C services into the EU. Special rules apply for services of consultants, lawyers, accountants, data processing and a small number of other sectors, which are deemed to provide services in the location of the customer and therefore do not pay UK VAT.

3. Digital services: All supplies of digital services are liable for VAT in the consumer’s member state. For B2C digital services, the responsibility for accounting for VAT lies with the supplier, not the customer. Businesses selling digital services to EU consumers need to register for a ‘Mini One Stop Shop’ (MOSS) in an EU member state to ensure they pay the correct VAT.

 

The rules are laid out in full in the TCA, but interpreting them can be complex and time-consuming. If your company is in its growth phase, seeking proper advice allows you to focus on expanding the business.

“Exporting services is a much more straightforward process than exporting goods and it would be a shame if businesses were to see the VAT aspect as a deterrent,” says Taddei. “There is a lot of good information available for free online and I would encourage people to look at this for themselves; however, there is no substitute for professional advice.”

Other considerations to bear in mind when trading services in the post-Brexit environment include business travel and the recognition of professional qualifications. For business travel, entry requirements vary according to EU member states and could hamper SMEs that provide physical services. Professional qualifications must be officially recognised by the appropriate regulator of the country where you wish to supply services.

Despite trading in services being relatively unaffected by Brexit, when compared with trading in goods, it is still a complex area. St. James’s Place and business growth advisers Elephants Child are on hand to provide expert advice to help you succeed and take your business growth to the next level.

While the focus of the post-Brexit trade deal between Britain and the European Union has been almost exclusively on the trade of goods, there are other aspects of the agreement that could be critical to the future success of many small businesses (SMEs).

If you own or run an SME that supplies services from the UK to the EU – or one that buys services from an EU company – the good news is that there has not been too much disruption to business as usual.

Unlike trading in goods, which the government’s EU Goods Sub-Committee described as “not simple” under the EU-UK Trade and Cooperation Agreement (TCA)1, the trade of services remains largely unaffected. This provides an exciting growth opportunity for early-stage businesses looking to expand their customer base as the global economy emerges from the coronavirus pandemic.

However, despite the regulations on trading services remaining relatively unchanged, it does not mean they are any less complicated. The result is that a business that was already supplying services to the EU should be well positioned to continue to do so – and expand its provision, should it see an opportunity. Meanwhile, if your SME is looking to start supplying or buying services, then it pays to take expert advice.

“The existing rules [before Brexit] for the supply of services to the EU were by no means straightforward,” says Paul Taddei, an Associate and Chartered Accountant at the accountancy firm Johnston Smillie. “Any business that was already supplying services to customers outside the UK before 1 January 2021 is likely to be well placed to adapt to the new regime.”

The lack of attention on the post-Brexit environment for trading services is surprising, given the service sector’s fundamental importance to the UK economy. In the period January to March 2021, the service industry accounted for 80% of the country’s total economic output and 82% of its domestic employment, according to government figures.2 Furthermore, the UK is the world’s second-largest exporter of services and the EU is the largest recipient, receiving the equivalent of 40% of the UK’s total services exports.3 These include sectors such as digital, financial, legal and business services.

Clearly, this presents a big opportunity for your business if you can provide the type of services that are in demand in the EU. Among the main considerations are new VAT rules for UK businesses supplying services to Europe. Here are some key factors to consider.

1. Business to Business (B2B) services: No UK VAT chargeable for services supplied to businesses outside of the UK, including the EU.

2. Business to Consumer (B2C): VAT is applied at the place of supply, which is the UK for a British business supplying B2C services into the EU. Special rules apply for services of consultants, lawyers, accountants, data processing and a small number of other sectors, which are deemed to provide services in the location of the customer and therefore do not pay UK VAT.

3. Digital services: All supplies of digital services are liable for VAT in the consumer’s member state. For B2C digital services, the responsibility for accounting for VAT lies with the supplier, not the customer. Businesses selling digital services to EU consumers need to register for a ‘Mini One Stop Shop’ (MOSS) in an EU member state to ensure they pay the correct VAT.

 

The rules are laid out in full in the TCA, but interpreting them can be complex and time-consuming. If your company is in its growth phase, seeking proper advice allows you to focus on expanding the business.

“Exporting services is a much more straightforward process than exporting goods and it would be a shame if businesses were to see the VAT aspect as a deterrent,” says Taddei. “There is a lot of good information available for free online and I would encourage people to look at this for themselves; however, there is no substitute for professional advice.”

Other considerations to bear in mind when trading services in the post-Brexit environment include business travel and the recognition of professional qualifications. For business travel, entry requirements vary according to EU member states and could hamper SMEs that provide physical services. Professional qualifications must be officially recognised by the appropriate regulator of the country where you wish to supply services.

Despite trading in services being relatively unaffected by Brexit, when compared with trading in goods, it is still a complex area. St. James’s Place and business growth advisers Elephants Child are on hand to provide expert advice to help you succeed and take your business growth to the next level.

While the focus of the post-Brexit trade deal between Britain and the European Union has been almost exclusively on the trade of goods, there are other aspects of the agreement that could be critical to the future success of many small businesses (SMEs).

If you own or run an SME that supplies services from the UK to the EU – or one that buys services from an EU company – the good news is that there has not been too much disruption to business as usual.

Unlike trading in goods, which the government’s EU Goods Sub-Committee described as “not simple” under the EU-UK Trade and Cooperation Agreement (TCA)1, the trade of services remains largely unaffected. This provides an exciting growth opportunity for early-stage businesses looking to expand their customer base as the global economy emerges from the coronavirus pandemic.

However, despite the regulations on trading services remaining relatively unchanged, it does not mean they are any less complicated. The result is that a business that was already supplying services to the EU should be well positioned to continue to do so – and expand its provision, should it see an opportunity. Meanwhile, if your SME is looking to start supplying or buying services, then it pays to take expert advice.

“The existing rules [before Brexit] for the supply of services to the EU were by no means straightforward,” says Paul Taddei, an Associate and Chartered Accountant at the accountancy firm Johnston Smillie. “Any business that was already supplying services to customers outside the UK before 1 January 2021 is likely to be well placed to adapt to the new regime.”

The lack of attention on the post-Brexit environment for trading services is surprising, given the service sector’s fundamental importance to the UK economy. In the period January to March 2021, the service industry accounted for 80% of the country’s total economic output and 82% of its domestic employment, according to government figures.2 Furthermore, the UK is the world’s second-largest exporter of services and the EU is the largest recipient, receiving the equivalent of 40% of the UK’s total services exports.3 These include sectors such as digital, financial, legal and business services.

Clearly, this presents a big opportunity for your business if you can provide the type of services that are in demand in the EU. Among the main considerations are new VAT rules for UK businesses supplying services to Europe. Here are some key factors to consider.

1. Business to Business (B2B) services: No UK VAT chargeable for services supplied to businesses outside of the UK, including the EU.

2. Business to Consumer (B2C): VAT is applied at the place of supply, which is the UK for a British business supplying B2C services into the EU. Special rules apply for services of consultants, lawyers, accountants, data processing and a small number of other sectors, which are deemed to provide services in the location of the customer and therefore do not pay UK VAT.

3. Digital services: All supplies of digital services are liable for VAT in the consumer’s member state. For B2C digital services, the responsibility for accounting for VAT lies with the supplier, not the customer. Businesses selling digital services to EU consumers need to register for a ‘Mini One Stop Shop’ (MOSS) in an EU member state to ensure they pay the correct VAT.

 

The rules are laid out in full in the TCA, but interpreting them can be complex and time-consuming. If your company is in its growth phase, seeking proper advice allows you to focus on expanding the business.

“Exporting services is a much more straightforward process than exporting goods and it would be a shame if businesses were to see the VAT aspect as a deterrent,” says Taddei. “There is a lot of good information available for free online and I would encourage people to look at this for themselves; however, there is no substitute for professional advice.”

Other considerations to bear in mind when trading services in the post-Brexit environment include business travel and the recognition of professional qualifications. For business travel, entry requirements vary according to EU member states and could hamper SMEs that provide physical services. Professional qualifications must be officially recognised by the appropriate regulator of the country where you wish to supply services.

Despite trading in services being relatively unaffected by Brexit, when compared with trading in goods, it is still a complex area. St. James’s Place and business growth advisers Elephants Child are on hand to provide expert advice to help you succeed and take your business growth to the next level.

 


 

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

 

Sources:

1 Beyond Brexit: trade in goods, House of Lords EU Goods Sub-Committee, 25 March 2021

2 Service industries: key economic indicators, House of Commons Library, 12 August 2021

3 Trading services with the EU: guidance for business, Confederation of British Industry

 

 


 

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

 

Sources:

1 Beyond Brexit: trade in goods, House of Lords EU Goods Sub-Committee, 25 March 2021

2 Service industries: key economic indicators, House of Commons Library, 12 August 2021

3 Trading services with the EU: guidance for business, Confederation of British Industry

 

 


 

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

 

Sources:

1 Beyond Brexit: trade in goods, House of Lords EU Goods Sub-Committee, 25 March 2021

2 Service industries: key economic indicators, House of Commons Library, 12 August 2021

3 Trading services with the EU: guidance for business, Confederation of British Industry