Frequently asked questions
FAQs for more technical aspects of the Services Directive for authorities can be found on the ELMS portal at http://elmsportal.businesslink.gov.uk/faq.
1. What is a service?
A service is an economic activity normally provided for remuneration outside a contract for employment. This activity could be industrial, or commercial in nature, a craft or the activity of a profession. “Remuneration” should be interpreted broadly, for example, money or payment in kind (but excluding wages). A service can be business to business or business to individual activity.
Services which are not provided for remuneration are not covered by the Directive. For example, non-remunerated house to house collections for charity would not be within scope.
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2. How can local authorities judge whether a requirement relates to goods or services?
There is no definitive test of what is a “service” and in some cases it may not be possible to determine that a sector as a whole is concerned with either goods or services.
To give three examples:
(a) our view is that restaurants are providing a service.
(b) retail premises will also generally be providing a service since, in offering those goods; they are providing a service to the customer in assembling and presenting a selection of goods for sale.
(c) car spray painting carried out in a car production plant is likely to concern goods but where it is carried out in the process of repairing a car or provided as an independent service, it will be a service.
(d) rules relating to the characteristics and composition of products, labelling etc, relate to the good itself and are not covered. Thus, for example, a provision requiring that only pesticides meeting certain criteria can be put on the market, would not be covered. However, if a supplier requires an authorisation to sell pesticides, this relates to the distribution of the product (a service activity within the terms of the Services Directive) rather than to its content/labelling etc and, as such, would come within scope of the Directive’s ambit.
Local authorities may need to take a case by case approach with their legal advisers.
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3. Which services are within scope of the Directive?
The basic rule is that a service is within scope of the Directive unless it is explicitly excluded from it. The following is the list of services excluded from the Directive:
- Financial services, such as banking, credit, insurance and re-insurance, occupational and personal pensions, securities, investment funds, payment and investment advice, including the business of credit institution.
- Electronic communications services and networks, and associated facilities and networks as defined in five Directives on electronic communications and related matters in five 2002 Directives. These Directives were largely implemented in the UK by the Communications Act 2003. Such services and networks include, for example, voice telephony and electronic mail services.
- Services in the field of transport including air transport, maritime and inland waterways transport, including port services, as well as road and rail transport, in particular urban transport, taxis and ambulances.
Examples of services which are not covered by this exclusion are removal services, car rental services, funeral services and aerial photography services. Neither does the exclusion cover commercial activities in ports such as shops and restaurants.
- Services of temporary work agencies. The HMG view is that this covers only the hiring out and placement of workers in temporary work, and does not cover other services provided by the same agency. BIS considers that “temporary work agency” should be defined as set out in the Employment Agencies Act 1973, section 13(3).
- Healthcare services. This exclusion covers healthcare and pharmaceutical services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health professional in the Member State in which the services are provided.
- Audiovisual services, including cinemas and broadcast services but not, in HMG’s view, storage of celluloid material for which a licence is currently required.
- Gambling services, which involve wagering a stake for monetary value in a game of chance, including lotteries, gambling in casinos and betting transactions.
- The exercise of official authority as set out on Article 45 of the Treaty.
- Social services relating to social housing, childcare and the support of families in need, where these are provided by the State, by providers mandated by the State or by charities recognised as such by the State. The HMG view is that services provided on a charitable basis by Registered Social landlords are out of scope of the Directive. Services provided on a commercial basis by charitable organisations or their trading subsidiaries are, however, in scope of the Directive.
- Private security services.
- Services provided by notaries and bailiffs appointed by an Act of Parliament.
Services of a general economic interest are excluded if they fall within one of the general exclusions listed in regulation 2, such as services in the field of transport. Other services of general economic interest are excluded from regulation 24 (freedom to provide services), including those in the postal, electricity and gas sectors, water distribution and supply, and waste treatment services.
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4. How can local authorities access information about the outcome of the national legislative screening exercise?
The BIS website http://www.bis.gov.uk/servicesdirective contains information on which national legislation has been screened in relation to the Directive and which HMG considers is out of scope, in scope but justified or in scope and being amended to comply with the requirements of the Directive. The website also contains a list of authorisations for which local authorities are responsible and which we believe to be within scope.
Primary Liaison Points within local authorities will be notified as and when the lists are updated.
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5. What is a "requirement” for the purposes of the Services Directive?
A “requirement”, for the purposes of the Directive, is anything (e.g. an authorisation scheme) that restricts access to,, or exercise of, a service activity. Therefore all licensing regimes, registration processes, approval systems and continuing requirements which affect service providers have to be checked to ensure they comply with the Directive.
A requirement could derive from national legislation, local authority Act or bye law, administrative rules, conditions attaching to licences, a standard contractual term which is part of an authorisation process or other restriction. local authorities, working with their legal advisers, need to apply the test of whether the rule in question is one with which a provider must comply in order to start to provide or carry on a service.
The Directive does not apply to private contractual arrangements. Subject to the point above about terms which are part of an authorisation process, we would not normally expect the terms of a contract between a local authority and a service provider to be caught by the Directive. However, a local authority should not use its standard terms of doing business with service providers as a way of evading its obligations under the Services Directive.
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6. Does the Directive apply to all requirements that might affect a service activity?
The Directive only applies to requirements that affect access to, or the exercise of, a service activity.
Thus, rules relating to traffic, certain planning rules that are not specific to a business and building regulations that are non-discriminatory and which structure the market or regulate specific products rather than the provision of services, are not in scope of the Directive.
For example, the HMG view is that the Building Control Act 1966 is not in scope of the Directive, but that the Building Regulations 2000 are in scope.
Local authorities may, however, need to consider some decisions on a case by case basis with their legal advisers. For example, a decision not to permit a third hairdresser to open in a local shopping parade is a decision about a particular business and is likely to be caught by the Directive.
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7. Who is responsible for ensuring that the UK implements the Directive correctly and on time?
BIS is responsible for managing the implementation of the Directive within the UK. If the Commission believes that the UK has not fulfilled its obligations under the Directive then it will first contact BIS, which will then investigate and respond to the Commission’s concerns.
8. What is the review process for a service provider whose application using the PSC is unsuccessful?
The PSC will provide information on the means of redress available to a service provider in the event of a dispute with a competent authority. If a service provider believes that a particular local authority has not interpreted the Directive correctly, they may also wish to seek legal advice as to whether there is any redress via the Courts.
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9. What’s been done re: communicating with business?
BIS has produced two one-page documents for business, which set out the benefits of the Directive and their obligations under it. We are also liaising with key representative organisations such as the Federation of Small Businesses, Institute of Directors and the CBI. In addition, we are encouraging all those involved in implementing the Directive, including local authorities, to consider how they might help.
10. Is there any additional funding to help local authorities implement the Directive?
The Services Directive does not change the functions of local authorities in dealing with licence applications, which stem from the existing UK legislation. The online application element in the Point of Single Contact (PSC) is being provided by BIS.
BIS is funding the development of the central PSC so that local authorities are not required to make substantial investments in their own online systems. Some authorities have already put in place electronic application processes either funded from their own resources or using the money provided by ODPM as part of the 2001-2005 e-Govt initiative. In these cases, we will link to those systems and will also accommodate a mix and match approach where a local authority has automated some licensing systems but not others.
The PSC leads to an opportunity for local authorities to put in place electronic processing by sharing in national economies of scale in areas where there would not otherwise have been a local business case justification for doing so.
Funding has been provided for local authority staff time on training related to the Internal Market Information (IMI) system through an allocation by Communities and Local Government as part of the CSR07 settlement. The system itself as well as the training and materials are being provided by the Commission and BIS.
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11. How will the Directive work?
- Abolishing restrictive legislation and practices that hinder service providers from setting up in or providing services within the EU
- Setting up Points of Single Contact in each Member State through which providers will be able to find the information and complete the formalities necessary to doing business in the Member State in question
- Facilitating greater co-operation between regulatory and authorisation bodies across the EU thereby reducing burdens on business
- Engendering consumer confidence in cross-border service provision through access to information and the high quality of services
12. What are the EU Services Directive benefits to the UK?
We estimate that the Directive will result in significant benefits to the UK, to the tune of:
- £4-6bn per annum to the economy
- up to 81,000 new jobs created
- an increase in real wages of up to 0.7%
For links to studies see Economics and evidence.
13. What do local authorities have to do to comply with the Services Directive ?
The Local Authority Guidance published on this website (put in hyperlink!) provides action points for local authorities, which is supplemented by other material on this site.
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14. Is there a list of formalities covered by the Directive?
The list of formalities is published on this site.
15. What are the consequences of a competent or local authority not being compliant?
There are two principal risks to not being compliant:
- The UK Government may be subject to infraction proceedings. The potential fine is significant and HMG would seek to ensure that non compliant local and competent authorities are required to make an appropriate contribution.
- The authority may face action by a service provider for not processing applications as legitimately expected.
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16. What does Mutual Assistance mean?
This is the process whereby competent authorities (regulators and licence issuers like local authorities) in Member States cooperate in the supervision of service providers operating in more than one Member State. The European Commission provides Member States with an electronic system - The Internal Market Information System (IMI) - to enable direct communication between regulators to this effect.
17. What is the impact of Mutual Assistance for local regulators and authorities?
The Mutual Assistance Articles of the Directive require the Government to ensure that competent authorities (bodies with a regulatory or supervisory role regarding service provision) co-operate effectively with their counterparts in other Member States. We do not expect this to result in any sudden surge in workload once the Directive is implemented.
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18. How will the Directive affect Small to Medium sized Enterprises (SMEs)?
The vast majority of service providers are SMEs. However, SMEs are often dissuaded from selling their services elsewhere in Europe, due to both time and financial implications. SMEs will therefore benefit from the more open regime, and the transparency that the Directive seeks to introduce.
The Directive's provisions allow SMEs to test new EU markets without the need to set up a permanent base. The points of single contact will help SMEs to take advantage of the more open market by providing a single resource to find out how they can offer services in each Member State.
19. How does the Data Protection Act applies to the implementation of the Services Directive ?
The Data Protection Act only applies to “personal information”, which does not cover companies. When personal information is processed, this will be in accordance with the eight principles of the Act. In particular, applicants will be informed of their rights under the Act and personal information will be kept securely.
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20. Who and what sectors of the economy will be affected?
The Directive covers a wide range of different services, including:
- Business Services: management consultancy; advertising; certification and testing; facilities management, including office maintenance; and the services of commercial agents.
- Services provided to both business and to consumers: real estate services, estate agents and letting agents; construction architects; distributive trades, which includes wholesale and retail; and the organisation of trade fairs.
- Consumer Services: tourism, including tour operators and tour guides, leisure services and sports centres; amusement parks; plumbers; and electricians.
21. Why are some sectors not covered by the Services Directive?
Most services are caught by the Services Directive, but some service sectors such as financial, healthcare, gambling and private security are not.
This is because these sectors are already caught by another Directive that is already in force, or because of other exemptions agreed when the Directive was being negotiated. For a more comprehensive list of services not covered by the Services Directive please see page 6 of the Guidance Note. Please note that unless a service is specifically excluded, the expectation is that it is covered by the Services Directive.
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22. Why did BIS commission the SOCITM Review and what does it mean for authorities?
BIS commissioned the Society of IT Management (SOCITM) to review all UK local authority and other competent authority websites to see how well they met the requirements of the Directive. The Review makes a number of recommendations as well as sets a benchmark for any future assessments. BIS has sent the Review to all competent authorities and local authority CEOs and Council leaders asking them to respond to the recommendations in light of their rating. BIS is considering with SOCITM how the requirements of the Services Directive can be included in SOCITM’s other reviews of local authority websites.
This Review has also been sent to other key stakeholders, including business representative organisations so that they are aware of what has been done and where improvements need to be made.
It can be found at: http://www.socitm.net/
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