Jacek Szufan, manager, VAT service delivery at TMF Global, predicts the UK’s tax future post-Brexit
Tax is one way the UK will continue to attract inward investment after we leave the EU.
It’s a tactic that has been put to good use over the past decade.
Corporation Tax has fallen from 30% in 2007 to 19% at present, with a further reduction planned for 2020. Moreover, Corporation Tax is one of the instruments the UK Government can adjust independently, as rates are not yet harmonised by the EU.
So, whether or not Brexit happens, opportunities exist to help make the UK more attractive from a corporation tax perspective.
VAT is straightforward
The UK’s VAT system has also been relatively free from excessive administrative complexity, which helps with its attractiveness.
This is borne out by a Tax Foundation study that analysed the number of hours businesses spend on complying with VAT, in which the UK ranked fifth among all EU countries.
The recent introduction of Making Tax Digital should make this compliance process even simpler. (Editor’s note: some argue that VAT should be further simplified after we leave the EU.)
Maintaining a balance
It remains to be seen whether the UK will decide to adopt an aggressive stance to structuring taxation in the event of a no-deal Brexit.
Norway and Switzerland may give the best clues as to what awaits us outside the EU. These countries stand outside the bloc but are connected to the EU in many ways, and manage to maintain a balance in their relationships when it comes to the economy and taxation.
Better or worse
The UK is still the fifth-largest economy in the world and the second-largest in the EU, and many will be watching closely to see whether the UK is better or worse off after leaving the bloc.
Undoubtedly, there will be concerns that the UK could introduce lower taxation and a more accessible tax system to attract business investment.
EU member states should be reassured by the fact the UK has been instrumental in setting up measures against tax avoidance. The OECD’s base erosion and profit shifting initiative being the best example to date. This is why the UK is likely to tread very carefully, so as not to disrupt the balance that it helped to introduce on the international scene.
Like many other countries, the UK has struggled with some loopholes in its tax system, but there are not enough to classify it as a ‘tax haven’, and that is unlikely to change any time soon.
Read more on tax as part of our #AATPowerUp Tax 2020 campaign for September and October:
- Power up your tax knowledge with AAT
- How MTD for income tax will shape the digital landscape
- How green taxes will shake up life in the UK
- 5 ways HMRC could plug the tax gap
David Nunn is Content Manager at AAT.