The current situation:
On a quick search through the entire UK tax legislation for the term “Europe”, it brings up 36 entries. To put that into context, the UK tax legislation currently runs to over 17,000 pages. So in short, there will not be much immediate change. This echoes the general consensus among all industries at the moment – it is potentially a big change but nothing is changing just yet.
During the run up to the vote, George Osborne suggested that, on a vote to leave, he would need to call an emergency budget. While this is possible, given the fact that parliament goes into recess on 21 July, any amendments that may be suggested cannot be enacted until much later in the year.
What might change?
While Europe does not feature heavily in our tax legislation, the fact that we are leaving the EU will still have an impact on UK tax. Most notably on VAT as it is this tax that has been most widely integrated and homogenised across Europe. Again, it is unlikely there will be any sudden changes, but over time we are likely to see a divergence from the rest of Europe. For example, we may see more items being exempt or “zero rated”.
In terms of taxes that affect the individual, the one area that may change further is that relating to non-domiciled people. Although there are changes afoot in this area, it is the part of the tax code that affects international individuals the most. Will the current changes that are being put through go ahead? Will we see more tightening of these rules or, perhaps, as we try to encourage wealthy people to set up business in the UK, will there be a relaxation?
What impact could this have on UK businesses?
For UK businesses, the main area that the EU has had influence over relates to “state aid”. In tax terms this means tax reliefs. The EU has imposed certain restrictions on tax reliefs, most notably Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs). In a country that likes to say that we encourage entrepreneurship, it is likely that these reliefs may become more generous.
Companies with branches or entities in other European countries will also potentially be hit. Under EU law, the UK could not pose restrictions on losses made by those entities in other EU countries – this may be possible after the UK leaves.