EU referendum - PwC comments on the tax implications 

Published at 08:54 AM on 24 June 2016

 Kevin Nicholson, head of tax at PwC, commented:  

“Brexit will undoubtedly affect how people and businesses are taxed. The UK will now have more scope to use tax to help particular industries, regions, and groups of people. In the short-term, uncertainty on future tax rules will create challenges for businesses as they plan ahead. Great care will be needed to prevent unintended consequences as legislation from Brussels is removed. Longer term, there will be fewer layers of legislation, which should simplify the tax system for businesses large and small.  

 

VAT  

"From the date of exit, the UK will have much greater freedom to set its own VAT rules. This could lead to more items becoming zero rated which may positively impact consumers and business. Or we may see changes that could be less positive for business but which may increase tax revenues for the government. A comprehensive review of UK VAT law and its links with EU law will need to be undertaken by the government to ensure that there is effective legislation in place post exit.

 

Corporate Tax  

“Brexit will undoubtedly impact the UK corporate tax system. Once the UK has formally left the EU, the fundamental freedoms enshrined in EU treaties will no longer have effect. EU directives and EU case law will not be relevant to UK corporation tax. This may reduce the amount of legislation but, as this includes legislation which act as relieving provisions, in some cases business will end up paying more tax. For example, the zero rate of dividend withholding tax under the parent-subsidiary directive will not apply and UK parent companies will need to fall back on treaty rates of withholding – which in the case of Germany and Italy are higher.  

“The UK Government will also no longer need to ensure that corporation tax legislation permits freedom of establishment in other EU member states. Depending on the exit negotiations, it may feel freer to implement measures to attract foreign investment as part of the ‘Britain open for business’ initiative. With the UK tax rules no longer constrained by parameters set by Brussels the future shape of corporate tax in the UK is unclear.  

 

Customs/Duties  

"Fundamental uncertainties will now arise concerning the UK's international trade in goods with the EU and the rest of the world. Unless the Government moves quickly to agree Free Trade Agreements the effect of customs duties could add costs through the entire supply chain for goods."  

 

Ends 

For interview requests, please contact Nicola Thorogood, [email protected] / 02078046007


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