UK Tax Implications post Brexit

Unlike VAT which is a European tax with many common rules, our direct taxes including corporation tax, income tax and capital gains tax are UK taxes, which means Brexit will have fewer consequences, though in recent years our direct taxes have been influenced by challenges that UK tax law breaches certain EU principles and arguably we will be more free of those factors. Similarly, the European Commission has looked into transfer pricing rulings granted by some States to multinationals like Apple. From outside the EU, the UK would in theory no longer be bound by EU State aid rules which are the basis for EC interest in these matters, but when the dust settles and we have to find a serious way to do business with our European counterparts we may find ourselves under more pressure than we might like to think to continue to adopt common principles.

A key post-Brexit factor will be that international groups who have traditionally seen the UK as a “first foothold” for expansion into Europe may look to adopt an earlier physical presence elsewhere in Europe, and might adopt different logistical approaches to the movement of goods. This might necessitate a re-think of existing corporate structures and this will require the tax aspects to be considered.

The removal of State Aid regulation may also enable the UK government to broaden the appeal of the Enterprise Management Incentive, perhaps opening this up to larger companies which are presently excluded.

A negative aspect of our departure will be the exclusion of the UK from various EU directives such as the Interest and Royalties directive which reduces rates of withholding taxes payable between EU entities and the EU Merger Directive which facilitates tax advantaged mergers within the EU.