Many taxing questions still need answering on a Brexit
With just 30 days to go until we go to the polls on Europe, analysts are working overtime to gauge what the implications will be.
One thing most agree on is that Brexit impacts Northern Ireland more than most, given that we are the only part of the UK that shares a land border with another EU member state.
With the NI Executive securing a reduced 12.5% rate of corporation tax from April 1, 2018, in seeking to ‘level the playing field’ with Ireland, what now are the possible tax implications and impact on businesses of leaving the EU?
The truth is that the implications are largely dependent on what alternatives the UK is able to negotiate and are as yet unknown.
One direct tax matter to consider is the fact that there are a number of EU Directives which provide for reduced tax burdens within the internal market. If the UK voted to leave, it would no longer benefit from these. This could be a real cost — for example, a UK parent company may well find itself subject to a withholding tax on a dividend received from an EU subsidiary with no way of getting relief for the additional foreign tax suffered.
VAT is a European tax and so currently the UK’s VAT must be in line with the EU Principal VAT Directive, but a Brexit vote would end this link, making a rate unclear.
Exiting the EU could also eliminate the cross-border personal shopping allowances for duty paid excise goods, replacing it with a much smaller duty-free allowance for travellers.
Essentially, the tax implications of a Brexit for Northern Ireland will depend on what other arrangements the UK is able to negotiate post-exit. In the longer term, the UK is likely to be keen to access some of the same tax advantages it currently enjoys.
For further information or advice on the tax planning implemented by your business, Peter Legge can be contacted at firstname.lastname@example.org
Grant Thornton (NI) LLP specialises in audit, tax and advisory services