Following on from the historic EU referendum on Friday 24 June 2016 and the subsequent resignation of David Cameron, there are now both challenges and opportunities ahead for businesses.
Whilst uncertainty in business may slow decision making and investment, businesses will now turn to their advisors to manage their way through what could be choppy waters. However changes to tax regimes may also provide many opportunities, so here we take a look at some of the tax implications many accountants and businesses could potentially face over the coming months and years.
Making Tax Digital
The first area which appears to have been discussed by the accounting community is the state of HMRC’s ‘Making Tax Digital’. After informing tax advisors and software houses that no official changes to the legislation could be made prior to the referendum, many were eagerly awaiting the results from HMRC’s ‘Making Tax Digital’ consultations and subsequent legislation changes to follow immediately, after a presumed remain vote.
It is possible that these consultations could be put on hold until a new Prime Minister and Cabinet are in place. Add this to the fact that the 2016 Finance Bill is behind schedule already we could be facing a prolonged wait for the Finance Act to get passed, with a very real possibility it won’t be passed until the tail end of the year.
This also casts potential doubt on HMRC being able to deliver on their planned deadline for Digital Tax Accounts in April 2018.
Another area to consider is whether or not an emergency Budget is on the horizon. During the referendum campaign, the remain camp provided an illustrative Budget which predicted the need for tax rises to counter spending cuts. If the UK are presented with an emergency Budget which mirrors that of the illustrative Budget we could potentially see a 2p rise in income tax at the basic rate, a 3p rise in income tax at the higher rate and an increase of 5% to inheritance tax seeing it rise to 45p.
As here will be a need to keep as many businesses based in the UK, there is unlikely to be any alterations to the rate of corporation tax at this time in an attempt to prevent these companies from leaving the UK.
Impact on VAT
The final buzz topic following the decision to leave the EU regards the future of VAT. As it stands, article 50 is likely to be in place from later this year and that will begin our non-reversible 2 year window to negotiate our exit from the EU. During this time, VAT it unlikely to be impacted in a big way. However, Intrastat returns will obviously cease to apply following this 2 year window with one of the biggest concerns being that VAT on expenses incurred in other EU countries may be difficult to recover.
There could potentially be some positives for businesses and individuals following the UK’s departure from the EU. Several accountants have commented that there is potential for more tax incentives to encourage investment in businesses in the UK which would see a definite tax benefit.
Businesses, individuals and tax practitioners were already facing a lot of ‘unknowns’ over the next few years with the commencement of Digital Tax Accounts. Following the result of the referendum and a Brexit, it is fair to say that these unknowns have just increased and the industry will wait with anticipation as to what opportunities or potential challenges this may bring.