The Secretary of State for Exciting the European Union (David Davis) has indicated that formal Brexit negotiations may begin by the start of 2017 - what are the implications for UK business?
Until at least 2018 there will not be any changes to tax and employment laws as a result of the vote.
Looking forward to when Britain's withdrawal is complete:-
VAT is operated to be compliant with EU law (as you would expect in a common market) could be subject to some significant reforms. The UK could replace VAT with a sales tax on goods and services, personally, I believe wholesale changes are unlikely.
The UK currently has to comply with EU rules restricting our ability to reduce VAT rates on specific goods and services such as domestic fuel and power, not forgetting the "Tampon Tax". If We are no longer constrained by the EU VAT Directive, the UK Government would be able to choose legislation to apply different rates to goods and services without constraint.
If VAT were applied to items currently exempt, or there are changes to the rates of VAT, the financial implications for business could be material. Changes to VAT law could lead to more onerous obligations such that business owners would need to invest time and money adapting their procedures accordingly.
Importing and exporting
I would expect significant changes to how businesses import and export.
For example, currently when a UK firm buys goods from an EU business The transaction does not result in any VAT being payable - a book entry in a VAT return being the only requirement. After Brexit, the transaction could be treated as an 'import' and import VAT would be payable at the time of importation. Subsequently, this would be reclaimed by the business on the next VAT return (unless the business makes exempt supplies), these or similar changes would have implications for the firm's cash flow.
The UK Government could have control over business reliefs such as R&D tax credits, which have limits placed on them because of the EU State Aid rules. It could be possible to extend or relax the rules governing the Enterprise Investment Scheme.
Uk employment legislation has been approved or derived from Brussels, so could be open to reform. Whilst the UK Government may choose to amend working rights, my opinion is that significant reforms are unlikely.
David Davis suggested that he will seek to cut regulation making 'Britain a better place to do business'. He said the 'regulation already in place will stay for the moment,' and that the 'flood of unnecessary market and product regulation' will be halted. Less regulation could be good news for business owners.
A new Chancellor, a new economic policy
With a new Prime Minister and Chancellor there could be significant changes to Britain's economic and fiscal policies ahead. The Autumn Statement will be our first experience of the new regime and further details on this Government's latest economic strategy.
There is still much that remains unknown about the future of UK tax and employment law. We all will be watching closely the new Chancellor when he delivers his Autumn Statement this year.
IoD Surrey Committee Member
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