As the historic outcome of the referendum starts to take shape, what is clear is that the British Public have spoken and narrowly told our government that they want a Brexit.
To help you understand what the post-referendum tax-landscape might look like, here are five key need-to-know points:
Business as usual
Nothing will change; existing laws, even those fulfilling EU obligations will continue into the foreseeable future. In fact, the UK remains a full member of the EU. Yesterday’s vote was only advisory. We have at least at least a two-year window to negotiate an exit, which starts once the Prime Minister invokes article 50, very possibly longer.
Despite commentary to the contrary I am sure that the Chancellor will hold an Emergency Budget within weeks. I see this step as being essential so that a clear Brexit roadmap can be set out to ensure a measure of calm is maintained in the financial markets.
If the UK does not join the European Economic Area or the European Free Trade Association it is set to regain complete control over the setting of taxes, within the framework of existing double tax treaties. After our exit the UK Government will no longer need to seek European approval in respect of state aid or tax incentives, such as enhanced capital allowances.
Non-EU companies who have previously seen the UK as a staging post to trade with the EU will be considering their position. There is little doubt that some will relocate to mainland Europe.
Even though VAT is based on European law, given that the UK collects in excess of 115bn relatively easily, it is unlikely that our Government will sweep it away or implement radical changes to existing legislation. On exit the UK will be free to extend the scope of zero rating and exemptions without the fear of a referral to Court of Justice of the European Union (CJEU). As part of the exit it will be necessary for the UK government and the EU to determine what would happen to any CJEU referrals that might be still be in the pipeline at the time of exit.
We are entering unchartered water, a period of protracted negotiations between our government and our European colleagues to ensure that an orderly exit is achieved. Existing tax and other legislation will remain in place until such time as the Government can plan for change.
There is no doubt that UK Plc has entered a new era.
Brian Palmer is the tax policy adviser for AAT.