UK votes to leave EU – What next?

As the nation digests the reality of an EU exit and with Prime Minister David Cameron handing in his resignation, we now face a period of uncertainty in both our business and our personal affairs. It is important for us to turn our attention towards how Brexit will affect key accountancy issues, including tax and help our clients assess the possible implications, risks and opportunities the result creates.

However little is known at present and a hurried contingency plan will be getting drawn up by those in power. What we do know is that few changes will be felt immediately so it is important to stay calm and take steps to make plans that take into account the mid to long term effects of the decision whilst the dust settles.

The UK could have much greater freedom in setting its own Tax and VAT rules. Arguably VAT is likely to require additional consideration as the operation of the tax is very  EU harmonised and there are specific rules dealing with goods and services supplied to and between EU states. In addition the derogations that permit zero and standard rating of goods could change.

The Government’s initial economic stance will depend on their attitude to austerity and the need for any adjustments.

As a general point many direct taxes have an EU impact not least the fiscal arrangements for certain payments between EU based entities. Further there is the EU intrusion into certain tax reliefs which must be compliant with EU state aid rules

Although one thing we can be sure of is that as power is taken away from Brussels, we will  hopefully see fewer layers of legislation, which may reduce some  of complexities of  the tax system for businesses.

In his resignation speech, David Cameron has made it clear it would be his successor’s job to determine the timing of the formal leaving of the EU, which will trigger the start of a two year ‘notice’ period during which the UK will negotiate terms of what is being described as “the world’s most complex divorce”.