What are the tax implications following Brexit?
What are the tax implications of Brexit? That's a mvoing feast, however currently there will be no immediate changes to the legal and regulatory environment. In any event tax has always been a competence of the member states subject to a unanimous decision by all those member states.
Cloud Accounting NI considers below some of the background and some of the things that may change with VAT and Direct Tax.
Transactions in both goods and services between the UK and the other 27 EU countries are likely to be the most affected by the UK leaving the EU.
The following changes can be expected when the UK leaves the EU:
- Abolition of Intrastat for movement of goods to and from the UK;
- Abolition of EC Sales Lists for sales from the UK to the remaining EU countries;
- Introduction of import and export rules for supplies between the UK and the remaining EU countries;
- Increase in duty deferment facility to cover import VAT and possibly customs and excise duties relating to imports from EU countries;
- The distance selling thresholds will no longer apply for small value of exports to remaining EU countries;
- Changes to the Mini One Stop Shop – VAT will still need to be charged and accounted for in relation to affected supplies to customers in the remaining EU countries. This may mean registering for the non-Union Mini One Stop Shop scheme in a remaining EU country if HMRC is unable to continue operating a UK scheme;
- Refunds of VAT incurred within the EU may become more difficult, having to rely upon the 13thDirective refund scheme;
- EU VAT law and rulings of the CJEU will cease to have direct effect, with the UK law and courts becoming the ultimate;
- In theory, VAT rates could change up or down, including items currently subject to VAT at 5% could becoming zero-rated, although such changes are not currently permitted under the UK VAT Lock legislation;
- The tour operators’ margin scheme could be changed or abolished.
It is perhaps just worth noting at this stage, that if Scotland becomes an independent country within the EU, the effects are likely to be considerably more significant.
It is more difficult to determine at this stage what might change on the direct tax front following Brexit and it will also depend on what new arrangements are put in place.
We have incorporated a number of EU Tax Directives into UK domestic law including the Parent Subsidiary, Interest and Royalties and Mergers Directives and they will continue in place.
If we were to become members of the European Economic Area, of which Iceland, Liechtenstein and Norway are current members, then we would have similar sorts of tax obligations as we currently have as members of the European Union.
It is also true that quite a lot of the more recent changes to the international tax regime have been driven by the OECD, and in particular its Base Erosion Profit Shifting (BEPS) Action Plan, and those changes will be unaffected by the UK leaving the EU.
Cloud Accounting (NI) will have further updates as things become clearer.