Brexit: The Aftermath

Last Thursday as a nation we voted and on Friday, depending on your personal inclination, we either celebrated or despaired as a nation divided. Yes, the vote was close, 52% vs 48%, and we saw record turnouts for the referendum, certainly higher than any I can remember in recent history for the UK electorate, which should be taken as a positive if it can be turned into greater participation in our national politics.

Anyway, as you should have guessed by now this is a blog about tax (with other musings occasionally I admit), so how has our decision to leave the EU affected tax? The short answer, as of yet is that it  hasn't, and Mr Osborne's speech this morning would seem to give us a reprieve until at least autumn time when we will have a new Prime Minister and leader of the Conservative party.

So, what can we expect?

The Chancellor was quoted pre-referendum as saying we would see £15bn of tax rises, comprising a 2p rise in the basic rate of income tax to 22%, a 3p rise in the higher rate to 43% plus a 5% rise in the inheritance tax rate to 45p. There would also be an increase in alcohol and petrol duties by 5%. He also mooted that there would be spending cuts worth £15bn, including a 2% reduction for health, defence and education, equivalent to £2.5bn, £1.2bn, £1.15bn a year respectively, along with larger cuts of 5% from policing, transport and local government budgets. Yet this morning he seemed more conciliatory, stating the strength of UK Ltd and our ability to weather the storm and emerge stronger. Was this simply scaremongering to maintain the status quo? Only time will tell...

What should be of more concern are the tax impacts of leaving the EU, rather than those likely to be imposed by our Chancellor.

As a result of Brexit the UK would no longer be part of EU’s Customs Union. This raises the prospect that the EU’s customs duties could apply to imports from the UK, making it less attractive for EU companies and consumers to source goods from UK companies. The UK of course could do the reverse, and as the UK is a net importer from the EU such a move is unlikely by either party.

After a Brexit, sales of goods to and from the UK may no longer be able to use the EU’s acquisition and dispatch system (accounted for on VAT returns). Instead they would become imports and exports which would need to clear customs and incur import charges.

These are but two of the potential impacts, but the consequences of departing from fiscal union with the EU may not be as apocalyptic as we have been led to believe, however, expect a bumpy ride on the train out of Brussels...