The impact of the recent Brexit referendum, in which the UK decided to leave the EU, potentially has significant economic implications for the country. Britain formally notified its desire to leave by using Article 50 of the Lisbon Treaty.
Article 50 initiated the start of a two-year process of exit talks before the UK exits from the 28-member bloc. The use of Article 50 means that Britain will leave the EU by the end of March 2019.
While the extent of change cannot be visualized with any certainty at this stage, there is a range of areas where Brexit could result in significant changes in tax and tax policy.
1. Custom charges- As a current member, UK levies the custom duties charged by EU. Transition to new laws will be reflected in import and export taxes.
2. Value Added Tax- It is highly possible that the UK will follow the existent system in this regard. As citizens will no longer be able to appeal in EU court of justice, government can flexibly frame amendments on VAT.
3. Withholding tax- Companies in the UK will no longer be able to gain benefit from the tax exemptions enlisted in the EU Parent-Subsidiary Directive and the Interest and Royalties Directive. After brexit, UK will definitely not follow a zero withholding tax policy.
4. Labor mobility laws- The wages and remunerations received by workers across the borders of European countries are regulated by EU. Now the companies would have to go through a complex network of bilateral agreements.
5. State aid- If the UK leaves the EU (assuming it is no longer part of the EEA and does not join EFTA), it will no longer be subject to EU law restrictions when seeking to grant State aid. This may affect the development of ongoing investigations, and direct tax measures.
6.Effect of foreign treaties- Many treaties between the US and EU states require EU membership for equal beneficiary treatment under the limitation of benefits clause of the treaty, once there has been a formal exit, the UK will not be a part of it. This may affect those groups that have the UK tax citizen-listed as parent and flows of interest, dividends or royalties from their US subgroup to a financing, holding or intellectual property-owning company in Europe.
7.Tax initiatives of EU- Subject to the conditions in which UK is leaving, it is unlikely that the UK will introduce various tax initiatives currently in progress in Brussels, such as the EU Anti-Tax Avoidance Directive, public country-by-country reporting and the common consolidated corporate tax base. However, where the UK has supported these initiatives, we can expect the UK to continue with similar legislation.
To sum up, while the darker predictions around the Brexit vote are unlikely to be realized, the economy is not losing its grip yet, and so the long term impact of the Brexit vote on both the UK and global economies remain unpredictable.
We hope you’ve got enough information regarding Brexit and changes in Tax laws in the UK. If you’re pursuing Taxation, then you might be in the stress of submitting your Taxation dissertation. In that case, you can take taxation dissertation help from the experts available online.