Now that the UK has left the EU, from the 1st January 2021 businesses will now start to see many changes in how they provide services abroad. These changes will affect most services businesses.
The government’s action checklist for services businesses provides a great resource if you want to check how you might be currently affected and how to handle for some of the key changes. You can access the checklist here. In this guide we’ve collated the key bits of information so you can understand how your business has been affected, how so and what to do to handle the changes.
How is your business affected by Brexit?
UK businesses working within the EU or EFTA countries (Liechtenstein, Norway, Switzerland and Iceland) might experience changes if:
Your business is based in the UK and supplies services to customers in the EU or EFTA countries - Local rules of each market may need to be checked from 1st January 2021 onwards.
Your business involves travel to the EU or EFTA countries - Visa free business travel will no longer be permitted except under very prescribed circumstances.
Your professional qualification was recognised in the EU in 2020 - From 2021, you’ll need your professional qualification recognised by the appropriate regulator for your profession in each country where you’ll be working – even if you’ll only be working abroad temporarily.
You are the director of an EU or EFTA-based business - You’ll need to pay close attention to local rules depending on what sector you operate in. You may not be able to invest or establish businesses within the EU or EFTA countries – you’ll need to check this on the gov.uk website depending on each specific country. There are also changes to recruitment arrangements which will affect who you can and can’t employ both in the UK and in the EU.
Changes to providing services: frequently asked questions
Q: Can I still use my UK professional qualification to provide professional services in the EU from 1st January 2021?
A: In short, yes – but you’ll need to make sure that your qualification is recognised in whatever country you wish to work in, even if you only plan to provide short-term services. You can check this with the appropriate regulator for your profession. If you fail to do this, from 1st January 2021, you might not be able to practice or service clients in the EU. The rules for lawyers or auditors are differ. Find out more on .gov.uk here.
Q: What should I do if UK-adopted international accounting standards are not equivalent to the EU standards?
A: If your UK business is listed on EU markets, you might need to produce accounts in compliance with both EU and UK adopted international accounting standards. If you’re preparing IFRS accounts, you’ll need to replace ‘EU adopted IFRS’ with ‘UK adopted IFRS’ for any financial years after 1st January 2021. This is especially important for UK incorporated groups trading on a UK regulated market with securities. If you have a UK incorporated company listed on other EU markets, you’ll need to ensure that you comply with those market rules and prepare your accounts in compliance with the Companies Act 2006.
If your UK parent company has a subsidiary or presence in the EEA: you’ll need to check the reporting requirements in the country in which the branch is located.
If you’re a UK incorporated group that issues debt from a subsidiary incorporated in the EU: you’ll need to comply with the rules of the subsidiary-based country and produce accounts in compliance with the UK companies act.
If you’re a UK company in the EEA: to comply with local audit requirements you should secure an auditor registered as a third country auditor in the relevant EEA state.
Q: Are there any changes to who can own, manage or direct companies in an EEA country following 1st January 2021?
A: Yes – you might encounter restrictions if the company is registered in an EEA country or Switzerland. Senior managers and directors might face additional requirements on their nationality or residency and there may be limits on the quantity of equity that can be held by non-nationals. Click here for more information.
Q: Are there any changes to providing services remotely to the EEA, from the UK?
A: Make sure you stay informed about any changes to regulations in the sector you operate in and the EEA country you provide services to. Changes may affect the regulations governing remote service provision from the UK to the EEA e.g. over email or video call.
You may face extra information or authorisation requirements or need to establish a legal presence in the EU to continue providing services. If you provide legal, accounting or healthcare services, there might be more requirements so you should check the appropriate member state sectoral regulation and seek legal advice if you need to.
Q: I’m a legal professional from the EU but I practise in the UK. How will the changes affect me?
EU and EFTA legal professionals practising in the UK will no longer be able to continue with reserved legal activities in the UK under their ‘home title’ following 31st December 2020. If you want to continue providing reserved legal activities you’ll need to requalify as a lawyer in the UK. If you want to work jointly with an English or Welsh lawyer, you’ll need to be registered with the relevant regulator as a Registered Foreign Lawyer in England and Wales. You can, however, undertake unreserved legal activities or work under the supervision of an English, Welsh or Northern Irish lawyer but you may need to register with a regulator e.g. the FCA for claims management activities.
For more information on this, see the following guidance on .gov.uk.
Other professions: Conversely, if you’re an EEA citizen and want your qualifications recognised here in the UK, there is guidance fro you on here on .gov.uk
At a glance: Changes to five key areas...
Services provided by UK businesses to customers in EU countries:
Changes may span from travel and invoicing, to reciprocal recognition of credentials for professionals which may no longer be automatic. From January 2021, you’ll need to check the local regulations of the countries where you do business, to check whether and how you’ll need to change the way you’re operating. The selling services to each country master guide provides quick access to the country guides so you can get clued up on the local regulations.
Travel rules about where you can do business are covered across all relevant member states here. Whether you need a visa or not to travel for business will have to be checked for each country to which you intend to travel. Visa and other travel rules can be found here.
There are significant changes here – both if you’re engaging EEA nationals to work here in the UK, and/or if you’re sending UK nationals to work for you abroad. Those being sent abroad for a working period may be required to pay social security payments in both countries, which will affect salary and take-home pay, which you may need to top-up to keep staff happy to work abroad for you. You can find out more here.
Employers may also need to buy indemnity insurance for their EEA-based employees.
Changes affect everything from advertising rule changes to shopping, shipping and contracting.
Earning money in an EU country:
You need to notify HMRC since you may still be subject to Income Tax in the UK based on whether you’re a temporary or permanent resident in the country you earn money in. You can find more information here
Transfer of data rules between the UK and the EU now needs need careful attention and you should keep data in the UK, not the EU. You won’t need to change how you send personal data from the UK to EEA countries from 1 January 2021, but if you’re receiving personal data in the UK from a source – including a server – based in the EEA, you may well need to put additional safeguards in place to be legally compliant. You can find out more information relevant to GPDR rules and data transfers and what actions you should take following 1 January 2021 here.
You may find that the ICO is no longer your lead supervisory authority for data protection matters too – and you may need to deal with another regulator in a foreign country. You can check if this is likely to affect you here. You may also need to appoint local representatives for data protection compliance so that you can comply with the EU’s data protection rules. This ICO guidance can help you to work that out.
How will providing services to EU markets be affected after Brexit?
Establishing and structuring business
Following 1st January 2021, establishing and structuring businesses in EU member states has now changed.
Check the status of any businesses or branches registered abroad in the UK too – you may find that since 1 January 2021, you can no longer own, manage, register, control or even dispose of businesses within your group that are located in an EEA country in the same way as you currently do.
For example, you may need an EEA national to be in control from now on, or you may have to take particular care not to exceed certain equity quotas/controls that were not required previously. There may also be limits on the amount of equity that non-EU/EEA companies or nationals may hold in businesses located in an EEA member state – something that has never affected UK businesses before.
Ultimately, you should try to get your professional qualifications recognised wherever you work.
Fortunately, you don’t need to do anything if your qualification has already been officially recognised by the relevant national regulator of the place you want to work, and your regulator's decision won't have been invalidated after 1st January 2021.
However if you’re UK-qualified and you do not have official recognition of your professional qualifications already, you’ll need to get it – which may mean sitting exams or meeting other conditions before you can offer your services there.
You can check whether you’re in a regulated profession on the EU’s official database here. Once you know where you stand, go here, to get specific detail from the EU on how to get your qualification in the country you want to operate in.
Limited liability partnerships
Limited liability partnerships may find changes to the limitations on their liability in some member states and in some cases, ‘limited’ status may no longer be recognised – an important firewall for many management teams, statutory directors and shareholders.
Hiring staff in the UK and the EU
Check staff residency rights and nationality requirements associated with those foreign subsidiaries or branches too. These may have now changed, and those individuals may no longer have the right to operate or live where they are currently based.
Check the ‘Structuring your business from 2021’ pages on the gov.uk website – these have a lot more detail on how businesses with group/branch operations in the EEA are now affected.
Following the 1st January 2021, the UK has introduced a points-based immigration system. This will not apply to EU citizens already living in the UK prior to 31st December 2020, who will be able to apply for EU settlement status any time before 30th June 2021. You may direct employees to the EU settlement Scheme if you wish.
Anyone you wish to employ now (after 1st January 2021) from the EU (who doesn’t already have EU settlement status) will need to apply under the new points-based immigration system in order to start work for your business/organisation. They will need to be sponsored, so you should ensure that you are a Home Office Licensed visa sponsor.
If you wish to sponsor migrants and you aren’t a licensed sponsor already, you should register now to recruit through the skilled worker scheme from now on – the process takes approximately 8 weeks. Licences are valid for 4 years if you’re successful. More on this can be found here on .gov.uk.
Whilst this new system requires jobs to meet additional skills, salary and language criteria which may affect your ability to employ people from the EU, you will be able to recruit skilled workers globally.
N.B. Irish citizens will be treated the same as UK citizens and thus unaffected by the new rules.
Travelling for business
Circumstances where visa-free travel will be permitted include holidays, playing sport, short term study and attending cultural events.
Benefits that EU membership has previously provided to UK businesses have now been largely withdrawn as of 1st January 2021. For example, provision of cross-border services to customers in the EU will be treated as originating from a third country. More details can be found on .gov.uk. You can also sign up for email alerts there.
Travel to Ireland is exempt from this and the rules below do not apply. You can continue to use your passport for as long as it is valid. Otherwise, before you travel you should:
- Check if you need a visa, work permit or other travel documentation
- Check your passport is up to date (according to the government, you’ll need at least 6 months left on your passport and regardless of how much time it has left it must be less than 10 years old)
- Get travel insurance
- Get health insurance – all European EHIC cards have now expired following 31 December 2020 (the government has some handy advice on buying the right travel and health insurance cover here)
- Check you have a recognised driving licence – you may need an international driving licence from now on to drive in EU states. And if you’re taking your own vehicle, GB sticker, insurance docs and/or valid proof of insurance.
Expect longer border control queues and added requirements, such as proving you have sufficient money for your stay and showing return or onward tickets.
Roaming charges and mobile phone tariffs will also affect your travel. Free roaming has now ended following 1st January 2021. New rules prevent you from being charged more than £45 without your knowledge and you’ll be asked to opt in to confirm you’re consenting to costs continuing, if you want to use your phone more. Each phone operator will have systems in place by then to provide instructions on how to achieve this.
You may be required to declare to customs, any goods that you’re taking with you, to use or to sell for business purposes. Different rules apply if the goods are only being taken abroad temporarily and will be returning (e.g. demo goods) or if couriers or freight forwarders are transporting the goods. More .gov.uk guidance on this can be found here, including how to make customs declarations and/or get help handling customs requirements and how moving goods from the UK to the EU will be treated as a supply of goods to which VAT obligations attach.
It’s the EU that decides if the UK meets a high enough standard of data protection rules to meet EU standards. It is currently assessing this. Although we have left the EU now, for data protection, there is still another six month transition period for the EU to make their adequacy assessment of UK data protection law. If the EU decides the UK does not go far enough, alternative data transfer mechanisms will need to be put in place and additional data handling requirements will need to be met.
SCCs and the ICO’s tools and recommendations will be really important if the UK does not obtain data protection adequacy. To keep data free flowing from Europe into the UK in the meantime, a ‘contract’ can be directly agreed by you (the business) and the sender on EU-approved terms. This contract usually involves ‘standard contractual clauses’ (SSCs) which act as a safeguard so that businesses comply with GDPR rules.
There are four sets of these SSCs which must be entered into by the data exporter (in the EEA) and data importer (the UK/other non-EEA countries). They impose contractual obligations on both parties and afford rights to those whose personal data is subject to the transfer. You should be aware that this means that individuals can directly enforce those rights against the importer (and the exporter).The new ICO tool can help you decide, select and understand how to use SCCs to benefit and sustain free data flow.
NB: if you enter into a new contract, you must use SSCs in their entirety and you must not amend them.
For more information about SSCs and to use the ICO’s new tool, visit the ICO here
Make sure you data map your business for any areas of risk because of Brexit changes as soon as possible if you haven’t done so already.
The eCommerce Directive creates a legal framework for e-commerce activity in the EU, but not all online services are covered. Regardless, UK providers no longer fall within this framework following 1st January 2021 for the UK – but they will still need to meet rules for individual EU member states.
Rules on online information, advertising, shopping and online contracting in EU member states will need to be considered carefully. Further guidance can be found here.
Accounting and auditing
Changes are being made to the Companies Act 2006 because of Brexit. Paperwork and some of the rules around business registrations, reporting and rights to trade, as well as liabilities, will change and you can expect them to be more burdensome.
You should pay attention to any reporting requirements in EEA states in which you operate. If you’re an auditor and you carry out audits of non-EEA companies (which will soon include UK incorporated businesses), you’ll need to register in the EEA country with the competent authority as a third company auditor. If you’re a UK auditor, you probably won’t be able to count towards an EEA firm’s required majorities of qualified owners following January 2021.