The Brexit Effect
Listed Under: Blog
As the UK comes to terms with the implications of a vote to leave the EU we look at how it might affect your tax bills. Note the emphasis on might, it’s too early to comment with any certainty on post Brexit Britain’s economic future.
In the run up to the referendum George Osbourne focused on potential tax hikes and emergency budgets should the UK vote to leave the EU. It is not yet clear whether this was political posturing or a correct prediction of a significant contraction of the UK economy. However what we do know from Philip Hammond is that there will NOT be an emergency budget.
In terms of direct taxes the EU’s main influence is preventing member states from using tax rates/breaks as state aid for businesses. As an example Brussels is set to review the UK’s £130m deal with Google after complaints that the tax settlement amounted to “state aid”. Similarly the EU is currently investigating Ireland’s tax arrangements with Apple and Luxembourg’s tax treatment of McDonald’s. The suggestion seems to be that post Brexit the UK may have more flexibility to set a lower level of corporation tax, amongst other tax incentives.
Most analysts expect that VAT is unlikely to significantly change post Brexit. Whilst there will be no requirement for the UK to continue aligning it’s VAT with other member states, by doing so may smooth trade agreements and improve access to the European Economic Area.
So as it stands there are no major changes afoot, however we wait with interest for the Autumn Statement for a signpost to the UK’s tax future.