Last week saw the Electorate of the United Kingdom make probably their biggest ever decision at the Polling Booth when they were asked two simple questions:
This was the result:
Remain: 16,141,241 (48.1%)
Leave: 17,410,742 (51.9%)
Total Electorate: 46,500,001
Turnout: 72.2%
Rejected Ballots: 25,359
The ballot took place after weeks of what can only be described as total acrimony across the whole political spectrum, with the most unlikely cross party allegiances forming to get their opinions over to the electorate. I am sure that there were other personal and political agendas also coming into play which ultimately left the Prime Minister tendering his resignation, the Leader of the Opposition receiving a vote of no confidence from 80% of his colleagues and the Leader of the Scottish Government contemplating another referendum vote as to whether to stay a part of the UK or not!
For my part I now have to contemplate what Brexit means for businesses as far as VAT and other Indirect Taxes are concerned and below I cover some of the issues.
Leaving the EU will undoubtedly lead to changes in VAT but will also provide the UK with freedom to set its own VAT and duty rates, without seeking clearance from the EU. This will be very attractive to future Chancellors looking to raise additional revenues or provide VAT reliefs in other areas (one of the major issues raised by the Brexit campaigners was VAT on domestic fuel and our inability to provide relief due to EU legislation).
In 1973 VAT was introduced into the UK as a requirement of joining the EU and so UK VAT law has always been required to comply with EU VAT law.
Going forward, I see the main changes being centred around the status of EU law and the UK’s previous requirement to adopt EU legislation. This will all now need to be brought into UK law.
Long-standing principles established by decisions of the Court of Justice of the European Union may no longer be applicable in the UK. The opportunity to refer a contentious issue for an EU ruling will also disappear, with the UK having sole control over the process.
There will obviously be changes to international transactions and how the UK will trade with the EU in the future. Even if the UK remains in some form of Customs Union, there will be compliance changes for VAT.
In all probability, VAT is here to stay and will almost certainly remain on ‘all fours’ with the EU VAT Directive. How we trade with the remaining EU member states in future depends on negotiations, but I honestly cannot see things changing in regards to the long standing contracts already in place.
The Conservative Party now have to elect a new leader who will automatically become Prime Minister and it will be he or she who will decide when to exercise Article 50 of the EU Treaty (Formal Notice to Quit the EU). Until then nothing really changes.
Once Article 50 has been triggered there will be a transitional period before any new agreement is implemented (probably looking at two years, so it could be 2018 before the UK is independent of the EU).
What I do see now is a fantastic opportunity for UK businesses to enter into Free Trade Agreements/Arrangements with the rest of the world, free from the shackles and red tape of the EU.
Exciting times ahead!
Stephen Fennell is CEO of SEF VAT & Indirect Tax Consultants Ltd. Visit www.sef-vatconsultants.co.uk
