While the post-Brexit financial landscape remains in flux, it is possible to make some educated guesses ...
Everyone will be affected by the UK tax system changing once we leave the European Union. 'Be prepared' is an excellent piece of advice I say to all of my clients, whether they're an employer, employee or sole trader. So what potential effects are there? I'll outline a few things for you below.
- VAT and customs duties
Every member state in the EU pays VAT, and the UK will continue that post-Brexit as the Treasury makes a great deal of revenue from it. Should we leave without a deal, and a subsequent trade agreement, it is likely that we'll pay import VAT as well as customs duties making trade with EU states potentially more expensive.
Trade outside the EU will change too as many of our 'rest of the world' tariffs were negotiated by the EU when we were members. The UK needs to establish a new tax regime for goods coming from both the EU and elsewhere. Although it's underway, I'm unsure how complete the schedules are right now.- Corporation, Income and Capital Gains Tax
It is very probably that post-Brexit, EU governance of UK tax legislation will be revoked meaning that we can change our taxation system dramatically if we choose too.
Expect to see changes in Corporation Tax and Income Tax first, with Capital Gains Tax and other reliefs changing at future budgets. Businesses especially will need support and dropping Corporation Tax will be a quick win for the Government with the business community.- Withholding Tax
This tax, which is applicable to interest, royalties and other financial matters, will change post-Brexit. Currently, businesses and individuals can reduce or eliminate withholding taxes on dividends owed in the EU but there may be no directive post-Brexit to cover this (especially if we leave with no deal) and this may incur a rate of 20% in future.- Enterprise Management Incentives
Where companies offer key employees the opportunity to buy shares up to the value of £250,000 over a three year period, these rules may become more flexible post-Brexit. The EU has imposed limits to tax relief on these schemes, and the UK Government will have more leeway to extend share schemes.
Should we end up in the EEA (it's still possible) we could benefit from State Aid approval for EMIs along with R&D Relief for Enterprise Investment Schemes.
Taxation post-Brexit is still very much in flux and in certain fields, I see scope for greater flexibility, yet in other areas, tariffs will be higher, and some are still to be negotiated!
We won't know the exact rules until we actually leave, and even then, some things will need to be announced in a budget before implementation. A 'deal' means we will understand the changes we must make, but a 'no-deal' will bring a lot of initial confusion.
We'll all know what's happening soon, but for now, watch this space!
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.