Tax Tip No. 313 - Brexit Out-Takes

An ultimately futile ‘X’ marks the spot

At the risk of offending 52% of my readership, I will nail my colours to the mast: ich bin ein Remainer.

Which is why I was in a particularly reflective mood, following the outcome last week, to consider some of the taxation impacts of leaving the EU. UK tax legislation is currently drafted in such a way as to not breach certain fundamental freedoms under the EU Treaty, concerning the free movement of persons, goods, services and capital within the European Union. That means that the UK government cannot currently enact law that disadvantages any EU jurisdiction over the UK. Now, you may be amongst those saying: “Good riddance!” But, all political considerations aside, shrinking the area which UK taxation applies to will have implications for all UK taxpayers (corporate or personal) with any dealings concerning countries in the European Union.

 For example (by no means an exhaustive list, and completely ignoring VAT), this includes: -

  • Double Taxation
  • Group Relief for Losses
  • Holiday Homes let Commercially
  • Agricultural Property
  • Companies with Patents
  • Capital Gains Tax Roll-Over Relief
  • National Insurance Contributions when working abroad
  • Interest Relief for Loans to Buy Company Shares  

The reality is that all my above references to ‘Europe’ and the EU aren’t quite the full picture. In fact, the rules apply to all countries in the ‘European Economic Area’ (or EEA), which includes all countries in the European Union, plus a ‘North Atlantic Triangle’ of Iceland (sorry to even mention Iceland!), Norway and Liechtenstein. In truth, the UK could theoretically leave the EU and join the EEA. But as that would require the re-instatement of the free movement of people, that outcome looks … unlikely.

Admittedly, as pretty much every commentator has said so far, change isn’t going to be immediate, and the nature of the change is going to be uncertain. But for those who have structured their affairs to take advantage of the fact that we have hitherto been a part of a European Union, the likelihood of any change is a stark one.

It was at least good of Boris to prepare us all for a shock. If only Roy Hodgson had given us a similar warning!