Last editedMar 20232 min read
Even though the UK has left the European Union due to the Brexit referendum, it remains a member of the Single Euro Payments Area (SEPA). In theory, nothing much has actually changed with regards to how businesses use SEPA, although in practice there are some additional details required to make payments from the UK to the EU and vice versa.
Some banks in some countries have also initiated additional charges to be paid for SEPA payments coming from the UK, though so far this is not widespread and most payments from the UK to EU countries do not incur extra charges.
Here we explain what SEPA is and how the UK’s payments such as SEPA direct debits are affected by Brexit.
What is SEPA?
SEPA is a payment-integration initiative that makes transferring money in euros as easy as domestic bank transfers. The SEPA initiative enables fast, secure and standardised bank transfers across the national borders of member countries.
It is primarily for EU countries, although the UK is not the first non-EU member to be a part of SEPA. Other countries and states who are either full members or participate in SEPA technical schemes include:
Iceland, Liechtenstein and Norway are members of SEPA despite not being in the EU, although they are a part of the European Economic Area (EEA). Switzerland are neither part of the EU or the EEA, but are still a member of SEPA. Andorra, Monaco, San Marino and Vatican City participate in SEPA technical schemes.
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Why the UK is still a SEPA member after Brexit
In the immediate aftermath of the Brexit referendum, there was great concern that the UK would lose its status as a SEPA member. However, UK Finance filed an application to retain membership on behalf of UK payment service providers in 2018.
The application requested the European Payments Council to allow the UK to remain a part of SEPA regardless of the outcome of the post-referendum Brexit negotiations. The application intended to avoid the negative consequences of the potential No Deal Brexit that both sides of the negotiating table were threatening each other with.
The European Payments Council ultimately approved the UK’s application in March 2019. The only condition was that the UK must continue to comply with all the relevant criteria that other member nations had to comply with.
So, SEPA still enables UK businesses to make euro transfers using direct debits or direct credits to other countries that are members of SEPA via a single bank account whilst adhering to a standardised set of rules.
UK SEPA payments after Brexit
The changes for UK SEPA payments include the inclusion of additional details in order for the transfer to be accepted. This means SEPA payment instructions from the business bank account must now include the debtor bank’s postal address.
When paying credits such as SCT or SEPA Instant Credit Transfer, the payment instruction must now include the full address of the originator as well as the BIC code of the beneficiary bank. There are also additional details required for direct debit payment collections from the creditor, including the full address details of the debtor and the BIC code of the debtor bank.
The European Payments Council has stated that the omission of these additional details for UK SEPA payments may lead to rejected transactions or other potential issues.
Some banks in EU countries, notably Spain and Italy, have also introduced charges for payments from the UK. However, it remains a violation of EU rules to reject the IBAN code of a SEPA member when a payment is made, which includes businesses in the UK making payments to another SEPA member.
We can help
If you’re interested in finding out more about SEPA payments after Brexit, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.