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Brexit and tax: what we know so far

In October 2016, we published a blog post on the possible tax implications of leaving the European Union.

Timing and circumstance dictated that the analysis of Brexit’s potential effects on direct and indirect taxes was largely theoretical.

Written just 4 months after the referendum on 23 June 2016, we had very little information about the government’s objectives and their negotiation strategy, not to mention the fact the negotiations with the EU did not begin until June 2017.

Now, more than a year on, have we learned anything new about how the UK’s post-EU tax system may be structured?

The negotiations

Negotiations between Brexit secretary David Davis and EU chief negotiator Michel Barnier began in June 2017, a few months after prime minister Theresa May triggered Article 50, marking the start of a 2-year negotiation period before the UK formally leaves the EU.

Discussions about trade and the UK’s future relationship with the EU are yet to take place.

This is because EU negotiators are insisting issues such as the so-called ‘divorce bill’, the future status of EU citizens working in the UK and the border between Northern Ireland and the Republic of Ireland be dealt with first.

While there is a possibility that negotiations about trade and commerce may begin in October 2017, it may be many months until both sides agree a final deal on issues affecting UK tax.

The Conservatives’ disastrous election performance in June 2017 may hinder the government’s negotiating position going forward.

Rather than provide the party with a strong mandate for negotiating Brexit, the party was left with a wafer thin majority in the House of Commons and a weakened leadership.

While the party tried to promote cabinet unity at the 2017 Tory conference, there appears to be a lack of consensus among government ministers about how best to proceed with negotiations.

More worryingly, there does not seem to be a unified vision of what a post-Brexit UK will look like.

Brexit and tax

The landscape of the UK’s post-Brexit tax system will be shaped largely by whether the country remains inside the single market and the customs union.

As we outlined in our 2016 blog post, leaving the single market will have a far greater effect on how businesses and individuals are taxed.

However, given that discussions about trade, law and commerce are yet to take place, we currently know little more than we did last year about the potential future UK-EU relationship.

Contact us

We will keep you informed about any major Brexit announcements made in the upcoming Winter Budget in our budget report.

Contact us on 01628 631056 or email tracya@knightandcompany.co.uk to find out how we can help you prepare your finances for the future.