Contractors’ Questions: Does the Brexit deal affect providing services from the UK to an EU firm?

Contractor’s Question: Does the guidance given to contractors at the 11th hour before the Brexit deal still stand?

More pressing for me ahead of a new contract, what if I use a UK limited company to provide IT services to an EU-based client, but I remain based in the UK and work remotely, with only occasional visits to the client?

Expert’s Answer: Let’s tackle your first question first.

Despite a Brexit agreement now being signed off by both the UK and the EU, very little practical information can be added to the Contractor UK piece you have linked to.

Since the deal, we have received many questions on how the VAT rules will change when a UK company like yours, invoices an EU company for services post-December 31st 2020.

The UK’s new status

Be aware, since January 1st 2021 the UK is a ‘third country’ so far as the EU/EEA is concerned. Contractor consulting services are Business-to-Business (B2B) exports so in that sense, the usual export rules will apply.

With VAT specifically, if a UK recruitment agency receives an EU country-registered Personal Services Company’s services, then the PSC will now not charge VAT to the UK business (which mirrors what it would have done with a US company).

Then, the UK company receiving the invoice will account for UK VAT as input tax on its VAT Return. In other words, the so-called ‘Reverse Charge’ provisions continue to apply.

However with VAT and further issues about contracting overseas, in the EU in particular, it is our hope that further post-Brexit negotiations and a specific agreement on services will add the detail you seek on the situation.

A change to your invoices

Regarding your second question, if you live and work in the UK and invoice your EU clients from your UK limited company, then there are very few factors that will change for you, at least as far as the Withdrawal Agreement now stands.

The one notable change to be aware of is that your Business-to-Business (B2B) invoices will be zero-rated as exports.

As an aside, what we are coming up against is a certain prejudice arising against UK limited companies. We have had instances where the client has asked to be billed by an EU company, although we cannot find any formal requirement for this.

Clients unreasonable demands (cont.)

We have also come across clients wishing to invoice UK limited companies from the EU, charging local VAT rates. We can find no grounds for this either, although some clients have insisted it is the case.

Keep in mind, services are of paramount importance to the UK but, in our view, less so to the EU.

Until the EU and the UK agree in further or new detail on how to treat such services, including IT services such as yours, then the rules we understand to apply are four-fold and as follows.

Four fundamentals

First, you are now very unlikely to obtain an ‘A1’ from the EU to work in the UK, or vice-versa. However, if you do hold such a certificate already, it will continue to be effective until its expiry. Without an A1 you will have to pay social charges in the country where you work.

Second, the UK and the EU have reached a healthcare agreement when visiting the EU.

In particular, millions of UK Citizens can still access free healthcare across Europe after Brexit through a new UK GLOBAL HEALTH INSURANCE CARD (GHIC).

If you apply for a card now, you’ll receive a new UK Global Health Insurance Card (GHIC) instead of an EHIC. But note, you do not need to apply for a GHIC if you already have an EHIC. Your EHIC remains valid in the EU until it expires.

Travelling without your GHIC?

Next, if you need treatment while visiting a country where GHIC is valid and you do not have your card with you (in your question you talk of occasional visits to your client in the EU), you can apply for a Provisional Replacement Certificate (PRC).

The Helpline to get a (PRC) is 0044 191 218 1999 - call from the hospital or clinic where you are receiving treatment and select ‘option 2’.

You should note that a (PRC) can only be issued if you need treatment.

Count your days or get fined, expelled

Fourth and finally, a UK national can now spend only 90 days out of 180-day period within an EU country without a visa.

You face fines and even deportation if after 90 days you don’t leave the EU completely.

However, be careful because you must aggregate the days you spend in the Schengen Area countries, so some contractors will need to keep an extra careful count of where they are and for how long. The Schengen countries are Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.

In closing, please note an important caveat -- you may not work gainfully without a work visa and the 90 days are for tourism and business purposes only -- not employment or running a business.

The expert was Kevin Austin, managing director of overseas contracting advisory Access Financial.

Thursday 7th Jan 2021
Profile picture for user Kevin Austin

Written by Kevin Austin

Kevin is a Fellow of the Institute of Chartered Accountants in England and Wales, a Fellow of the Association of Chartered Certified Accountants, a Fellow of the Association of International Accountants and a Fellow of the Chartered Management Institute.

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