Action Points for Service Providers

General Review

  • Every business is unique. In some cases, a business may have carved out a niche in a cross-border business that relies in some way on European Union-based rights and freedoms that will no longer be available after December.
  • Don’t panic – but do prepare!  In most cases, business is likely to continue as before. Most services sectors are not regulated.  Even if no longer guaranteed by EU law, new restrictions on doing business are unlikely in the short to medium term, in such cases
  • Northern Ireland businesses which provide services cross-border into the Republic of Ireland or elsewhere in the European Union should examine their potential exposure to the across-the-board changes in the rules of business that are likely to apply from 2021. Equally, where they rely on service providers in the European Union, businesses should investigate whether any new regulatory barriers or considerations arise for them.
  • In some particular sectors, service business may rely on EU wide licences to provide services into the Republic of  Ireland or elsewhere in the European Union, which will be no longer recognised after December 2020. This occurs principally, in some areas of financial services, professional services, transport and communications. In other cases, the principal issues may relate to the qualifications and personal licences of employees and service providers.
  • All businesses engaged in providing or receiving cross-border services will have to deal with employee/ immigration issues for EU 26 employees, VAT changes and currency risks, which are highlighted elsewhere on this site, as well as the more general economic impact that may apply. For some businesses, the changed rules on procurement for state contracts will be critical.
  • Where the market into which or from which services are provided is the Republic of Ireland, then the Common Travel Area, long shared history and similar regulatory regimes may assist. Where services are provided into continental European jurisdictions, more challenging issues may arise.
  • It all comes back to planning!  Anticipating the risks and pitfalls unique to your business can avoid or at least mitigate nasty surprises. In most cases, something can be done. Although all the consequences of Brexit cannot be foreseen many of the direct and obvious impacts can be anticipated and managed

Service Provider Should Review “Supply Chain” too

  • Service suppliers should review their own supply chain in much the same way as a business that supply goods.
  • UK and Irish service suppliers should consider whether they use an EU based  authorisation or licence granted by their home state to provide services into another EU state or into the UK. If they do so, they may need to take action to ensure continuity. They should consult the EU Preparedness Notices and the UK Guidance to see whether any temporary grace periods will be allowed.
  • Identify whether the business is providing services into the other state relying on any license or authorisation dependent on EU membership. If this is the case advice should be sought from accountants, solicitors regulators or industry sources to establish what new authorisations licences or other arrangements might be required.
  • Identify whether any key provider of goods or services or customer (whether in the home state or other state) is providing services or selling goods in reliance on EU wide licences and authorisations. In these cases, it may be desirable to vouch that provider has taken steps to ensure continuity of supply. The other supplier or customer’s business model might have to change in a way that affects the business concerned

Changes to Regulated Suppliers and Customers

  • If the service provider purchases goods or receives services from the other jurisdiction then, they should consider whether any disruption in the provision of these goods or services might occur. They should seek assurance from their suppliers that they have in place appropriate arrangements so that they can ensure continuity of supply after 2020. They might consider  alternative suppliers, where available
  • In some cases, those who provide certain services to client businesses which are regulated must themselves meet certain qualification and other requirements. The circumstances would be very particular. In other cases, existing clients may themselves have established a presence in the other jurisdiction in order to continue to provide services . This  may require some corresponding reorganisation on the part of the service providers.
  • EU wide rules are more common in relation to goods.  In some cases, services and particular roles relating to those goods are subject to EU authorisations licences qualifications. This applies  for example in relation to certain aspects and roles in the food construction pharmaceuticals and medical device industries.

Reviewing General Doing Business Rules in host state

  • In the case of business to business supplies within the European Union, the VAT requirements for the supply of services in the other jurisdiction may change. Different proof of the service recipient’s status must be obtained and retained for audit.
  • Currency risks may affect service providers in the same way as other traders. If contracts provide for revenue or expenditure in the other currency, then consideration should be given to the risk involved in the event of significant currency fluctuation at the end of the year. The other sections of this website in relation to currency risk management should be consulted
  • Do any employees or keys service providers who work for the business rely on qualifications from the other jurisdiction to do their job at present? If so review whether these qualifications will continue to be recognised. The EU Preparedness Notice confirms that there would be continuity of recognition of qualifications for those whose qualification have been recognised in the host state prior to exit.

EU and UK Guidance

  • Both the EU and the UK published several hundred notices and guidance notes in the lead up to the 2019 schedule Brexit dates when there was a risk of a no-deal exit  These dealt with particular issues or sectors, with a principal focus on a no-deal exit scenario.
  • Although many have been withdrawn,  in particular on the UK side, the EU and UK have begun to update and provide new guidance notes and to cover both the context of a “deal” or “no-deal” scenario.
  • Both the EU notices and UK guidance is important to businesses based in United Kingdom which provide services into Ireland or elsewhere in European Union and to Republic of Ireland businesses that provide services into the United Kingdom. This is because in most cases the notices address the position in relation to providing services in the particular jurisdiction and providing services cross-border into the other jurisdiction.
  • In some cases, the guidance states what the new legal regulatory position will be when the UK  becomes a non-member state under EU rules (and the corresponding position in the UK ) without any significant mitigation or easing of the position. In other cases, the EU and more especially the United Kingdom agreed to allow a period of adjustment where the strict rules might be expected to apply are postponed or gradually apply over a period.
  • It is fair to say that  EU notes allow for less mitigation and grace than the corresponding UK notes. This is because neither the  EU Commission nor State governments can waive EU law rules, without amending them. In 2019, the EU took the approach of granting mitigations only where it was in its member’s interests such in some transport sector. In contrast, the UK being a non-member state has much greater flexibility to make allowances and afford mitigation.
  •  Because there may be a no-deal exit at the end of December 2020 and  because any agreement that may be reached is likely to be light in relation to the services sector and is likely to be agreed very late in the day, it seems likely that both the EU and UK will continue to issue guidance notes which allow for mitigation s and adaptation periods in some particular sectors.
  • It may be that when an EU UK agreement is reached, further adjustment periods adjustment will be allowed. However, it should not be assumed that grace periods and mitigation will be afforded.
  • It is very important that businesses in the sectors concerned or which are affected by the issues concerned, follow these notices and guidance as they are issued and updated.
  • Businesses in particular sectors should consult the guidance relevant to their sector and the EU commission website or the website.

In some cases, the UK notices/guidance allows for a period to adapt to the changes and full rigours of the new rules. However, businesses should not assume that such allowances will be made, even if they had been proposed for a 2019 no-deal and they should plan accordingly.