This is a big question with very few answers just now, but it’s one lawyers and tax advisers are beginning to ask themselves. The answer would most likely depend upon the nature of the exit – as I have been learning there are any number of models (or ‘deals’) that we might agree on with the EU in relation to our continuing relationship. We might be members of the EEA, or we might do combined trade deals, or go it alone. Or we might do something else. It’s confusing.
Perhaps it’s best to avoid the questions for the moment and instead deal with some more questions as follows:
• As the EU is a customs union, any departure might lead to the imposition of customs duty on all imports into the EU.
• UK VAT is directly based on the EU directives. If we were to leave the EU, how would UK VAT work? How would it interact with the equivalent systems in the other EU jurisdictions?
• Would the UK be free to vary tax related incentives such as R&D, EIS and EMI free of the EU state aid rules? Would any government do so?
• One would assume that the EU interest and royalties directive that helps exempt the payment of interest and royalties from UK withholding tax in certain circumstances would disappear overnight.
• The UK tax system has forcibly been changed via EU directives, ECJ case law, and other EU related dictates. Will all of these changes be reversed or will the UK tax system continue without deviation in this regard?
• The movement of people around the EU is underpinned by the social security system and treaty. All of this would likely result in more social security liabilities for mobile employees and employers as they move around Europe.
• What about anti-avoidance provisions, such as ‘transfer of assets abroad’ which have been curtailed by the ECJ and EC over recent years – would the UK government return those provisions to their aggressive and uncertain former selves?
• All EU countries have signed a mutual co-operation treaty in the field of taxation. Also in the field of sharing taxpayer’s information with one another. Will this end?
There are many questions that come from a basic analysis of the UK tax system. Going into the EU might have been easier because there wasn’t an immediate ‘big hit’ of issues and indeed the EU was a different beast then, but now we would have to reverse/or consider amending a humongous pile of legislation…and whilst I don’t know which way I will vote just yet, the professional woes it might bring are at least playing on my mind and will form an element of my final analysis!