The tax implications of Brexit
11 July 2016
The political fallout of the referendum result was immense for both major parties with the Prime Minister’s resignation from office. Whoever ends up leading the Conservative Party and taking the reins at Number 10, one key issue concerning businesses and individuals is what the tax implications of leaving the EU will be when we come to it.
In the short term, one such concern lies with the long-awaited ‘Making Tax Digital’ consultations which could well be put on hold until a new Cabinet is appointed. The 2016 Finance Bill is already behind schedule and the Conservative party leadership election could mean that the Finance Act may not get passed in early October, when it was supposed to be. While talk of an emergency Budget are now being downplayed, a change of leadership could entail a new Chancellor, who will have their own idea of what needs to be done in the wake of Brexit. Mr Osborne has already highlighted corporation tax cuts as a possible carrot to incentivise firms doing business in the UK. The Autumn Statement this year may be an even more important event than usual.
In the medium term, the changes that could take place in the tax system revolve around the formal date of exit from the EU. Direct taxes may be imposed by UK law, but they must be operated in accordance with EU law. VAT, for example, is both imposed and operated in accordance with EU law, which won’t change in the short to medium term. Once the UK has left the EU, it will be able to set its own rates. But what changes may be necessary to facilitate business within whatever trading structures emerge will be the key question - and we are unlikely to know that answer for some time yet.
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