The UK officially withdrew from the European Union (EU) on 31st December 2020, triggering a vast array of tax and tariff changes across almost every industry. In the secondary software market, Brexit has caused a little confusion amongst resellers as to whether they face hidden shipping or tax costs. In this article, we’ve put together a helpful overview of the facts.

Q: Will UK-based secondary software suppliers face any hidden costs when invoicing EU customers, or vice versa?

A: No. If both entities are VAT registered, nothing will change. Businesses should continue to treat software licencing as a kind of service, placing it outside the remit of value-added tax (VAT).

For example, if you’re a UK-based supplier of used licences and want to invoice a German, Spanish, or French client, your invoice document should be issued without any VAT added.

Q: Will secondary software suppliers based in the EU face any hidden costs when invoicing business customers in other EU member states?

A: Again, the answer is no. Let’s say, for example, a secondary software supplier owns an entity based in a member state of the EU such as Spain and resells pre-owned licences to a client in another member state such as Germany. The location of supply is where the business will be considered an established entity. In this way, no VAT will need to be added to the sales invoice from the Spanish supplier to the German client.

It is worth noting, however, that the sale must still be recorded on a local EC Sales List and the business customer’s VAT number must be visible on the invoice issued by the Spanish supplier. The invoice legend must also state that the service is subject to reverse charge mechanisms.

Q: Should EU or UK-based suppliers charge VAT when invoicing business customers in the same country?

A: In both cases, suppliers must add VAT in accordance with local guidelines, regardless of the business status of the client.

In 2012, the European Union (EU) ruled that a software license legally can be treated like any other good, so long as the license was perpetually owned (I.e., not on a subscription). The analogy we often tell customers is if you run a business where you owned a fleet of vehicles, when the time came to upgrade, what would you do with the old vehicles? Leave them to rust? Of course not. You would sell them on as they still hold value. So why should a software license be any different?

Working alongside partners, we at EasySAM have helped our customers make back £1,000,000+ from re-selling old software.

An example of where we see this in the real world is where a customer moves to Office 365. All their old Office Professional Plus Licenses still hold value, and in a lot of cases this can be a sizeable figure.

On the 31^st December 2020, the United Kingdom (UK) formally left the European Union (EU).  A withdrawal agreement (‘Treaty’) was agreed, and the following summarises the key facts concerning how that Treaty affects the trade of pre-owned software transactions between the UK and the EU:

New research from MHR Analytics has revealed that nearly two thirds of UK companies are planning to significantly increase their investment in IT next year in response to fears surrounding the impact of Brexit.

The company’s new report entitled “Business Insight: The Data Surge’ surveyed 200 senior decision makers across large and medium sized UK businesses about their investment plans.

When questioned as to which factor would most likely trigger a drop in revenue for 2018, the majority of respondents said it would be Brexit at 57 per cent followed by reduced customer spending at 22 per cent. Surprisingly only ten per cent of those surveyed cited GDPR as a factor that would have an impact on revenue while just seven per cent said no factor would trigger a drop in revenue.

MHR Analytics’ survey also found that businesses were boosting investment in key areas to tackle the revenue drop with IT leading the charge by a significant margin. Of those surveyed, 59 per cent of businesses said they will increase IT spending, 48 per cent believe marking will also see an increase and 46 per cent plan to boost investment in sales.

A majority (96%) of business chiefs said they understood the importance of data for their company’s future. However, one in 10 businesses have yet to implement big data strategies and less than a third regularly conduct big data projects.

SVP at MHR Analytics, Nick Felton offered further insight on the findings of the report, saying:

“It’s clear that businesses are braced for significant turbulence next year and are planning major investment in key areas to power through an anticipated drop in revenues. Despite these fears, companies are adopting a combative approach to this problem, with departments such as IT, marketing and sales all set for a cash injection. With unpredictable market conditions, data management and analytics are critical for helping organisations deliver significant cost savings by enabling accurate decision-making. Despite a potential revenue dip, companies are still planning major investments, of which data management is a good choice in uncertain times.”

Software is ubiquitous.

It is at the heart of every aspect of modern life. We depend on software at the office, at school, at home, in our leisure time, when we travel and when we communicate. Software helps us to be more effective, more creative, and more efficient.

Ironically, software is so pervasive that one would be forgiven for overlooking just how much it contributes – from both an economic and job creation perspective. With Brexit on the horizon, it is more important than ever to consider how the industry may be affected.

We recently worked with the Economist Intelligence Unit to reveal the true value of software, both in the UK and more widely across the European Union. We wanted to quantify software’s impact and assess how the EU and certain member states gain from its burgeoning influence.

The results from the research were intriguing. Overall, software delivers a total value-added (direct, indirect, and induced) GDP of £709.8bn – over seven per cent of the EU28 total GDP. This contribution comes from all sectors and all levels of the economy, from farming and manufacturing, to services, education, and healthcare.

When you hone in on the UK, software’s direct and indirect contribution is also substantial, and higher than any of the other “Big Five” EU markets (Germany, France, Spain and Italy). In 2014, the software industry added £50.9bn directly to the UK economy, equivalent to 2.9 per cent of the country’s GDP. When factoring in its full impact (including indirect and induced effects), software’s contribution climbs to around 7.1 per cent of UK GDP, which is a staggering contribution of £124.8bn to the economy.

The UK software sector also supports the employment of the most people compared to the other major EU countries analysed in our study. It has the highest percentage of total jobs too, generating nearly 2.6m – more than twice the size of the entire population of Birmingham, and equivalent to 8.4 per cent of all jobs in the UK.

Software also contributes 9.7 per cent of total private sector research expenditure in the country.

With Brexit negotiations looming, a new regulatory framework must be crafted to allow the software industry, and in turn the British economy, to thrive in a post-Brexit environment. To maintain its leadership of the IT industry, the UK needs to have a better, or at the very least equal, regulatory environment – and one that is fully aligned with international and EU regulations.

It will be important to devise legislation that is future-proof to avoid stifling innovation or delaying the uptake of new technologies. Countries choosing policies that encourage technological developments and support a digital economy boost their competitiveness and guarantee their role as hubs in the globalised economy.

To keep pace with growing global competition, the UK must embrace software’s potential. The regulatory landscape needs to acknowledge the inherently global nature of the software industry while leaving room for digital innovation.

Championing the free flow of data across borders without unnecessary restrictions would send a strong signal, as would embracing fully the development of the next generation of digital standards in international fora and opposing mandates on the localisation of servers and other computing infrastructure.

Our health, wealth, work, social lives, leisure and security are all improved by software, and the potential for further benefits is limited only by our imagination. Software is the key to realising the benefits of the twenty-first century and beyond. The new UK government will need to seize the opportunity.