Setting aside the initial shock of the Brexit vote and the ensuing political instability, which shows no sign of settling down any time soon, one key area for businesses and individuals as we progress towards our exit from the EU is understanding what the tax implications will be.
There has been talk of an emergency Budget as a change in leadership could entail a new Chancellor, who will have their own idea of what needs to be done in the wake of Brexit, but this is unlikely to happen until the Autumn. George Osborne has already highlighted corporation tax cuts down to 15% as a possible carrot to incentivise international firms to do business in the UK. The Autumn Statement this year may be an even more important event than usual.
One immediate impact may lie with the long-awaited ‘Making Tax Digital’ discussions, which have experienced practical difficulties and may well be put on hold until a new Cabinet is appointed. The current Finance Bill is already running behind schedule and in the current political climate it could mean that the Finance Act, due to be passed in October, may be delayed.
In the longer term, the changes could be wide ranging. At present, UK companies benefit from the ability to pay and receive dividends, royalties and interest tax efficiently between companies in different EU countries. It remains to be seen whether participation in this will be possible post Brexit. This plus the possible imposition of trade tariffs may have significant consequences for the UK’s attractiveness as a base for inward investment as a footstep into European markets.
The tax which could change most significantly is VAT. VAT is an EU wide tax governed by EU law. Post Brexit, the UK will have the flexibility to amend and develop its own VAT law, without the current EU constraints, which could be positive. On the downside, the current cross EU reporting and refund mechanisms may no longer be accessible, potentially creating more of a compliance burden for UK companies trading in Europe.
At present it is too early to start to plan with any certainty. It’s going to be a case of watch this space as events unfold over the next few months.
If you would like advice or are concerned about any aspects of your affairs, don’t hesitate to get in touch with our expert tax team on 01254 679131.