Here we look at frequently asked questions we hear from our clients when considering potential tax changes after the Brexit transition period that may affect your personal and business income.
Question: I work abroad, will I be taxed twice on my income after Brexit?
Whether you are a UK national working currently in the EU or an EU national working in the UK, the possibility of double taxation both in the country of work and your home will be of serious concern to you.
The good news is that, regardless of how the UK leaves the EU, with a deal or no-deal, bilateral agreements with all EU members dictate that the elimination of double taxation will continue to apply, as it does now.
These bilateral agreements ensure that either only one country can tax employment income, or if both countries have tax rights on your income, then the country you live in will give you tax relief for the tax paid in the country where you work.
Question: I sell goods and services to the EU, how will VAT be affected?
VAT is the main area where we will see the most change in tax when Brexit occurs. Both transactions in goods and services between the UK and the other 27 EU countries will have new import and export rules to adhere to, and ultimately, the UK Government will now be in charge of VAT rules, rather than the EU, when we leave. The main thrust of the changes in VAT in a post Brexit world is that UK companies will have to pay VAT upfront when importing. There is therefore a direct impact on your business’ cash flow which could be the difference between ‘sink or swim’ if you are small business owner. It is vitally important, therefore, to be prepared for the likely upcoming VAT changes after 31 October, even if you are a VAT registered business only operating in the UK, you could also be affected in time as the UK Government take full control of VAT rules. And if you live in Scotland, the spectre of a independent Scotland looms ever more likely and if Scotland becomes an independent country that stays within the EU, this could potentially bring further complexities to your business’ trading processes. Contact us to see how we can help you navigate through the expected changes to the VAT rules, in a post-Brexit world.
Question: Will it be much harder to hire EU nationals after Brexit?
The focus of the Brexit negotiations to date have been around immigration and the freedom of movement between the UK and the EU countries, a direct impact on the way businesses and people will deal with working with EU Nationals. Another important consideration, although an indirect consequence of Brexit, is the effect on Foreign Direct Investment (FID). Over the coming months, the U.K. authorities are likely to try to provide reassurance and bolster public and business sentiment and show Britain is ‘open is for business’. Indeed, it has already been indicated that in order to offset any slowdown in the U.K. market, the U.K. will actively pursue tax strategies to attract and retain FDI; in other words keep money flowing into the UK from foreign countries, including the EU. The Chancellor, Javid, in the latest reading of the Finance Bill hinted at a simplifying of the UK tax system, not a new concept, but with a specific focus on a potential reduction in corporation tax to help keep Britain competitive and attractive to FDI and foreign talent in the UK. Time will tell whether a reduction in corporation tax will take place but taking into consideration new immigration rules restricting the number of foreign nationals coming into the UK, it is no surprise that the UK government is looking at tax incentives to attract FDI and foreign talent.
Question: Will Inheritance Tax rules in the UK be affected by Brexit?
Regardless of how the UK leaves the EU, with or without a deal, Inheritance Tax will not be affected by Brexit. Inheritance tax in the UK is charged on your worldwide assets if you live or are domiciled in the UK, as well as transfers of UK assets by people who are not based in the UK. You can read more on the latest changes to the UK Inheritance Tax rules here. In summary, any expected tax change in the UK after Brexit will be lead by the UK government’s Brexit negotiations with the EU, and with time running out before the 31 October deadline, we would strongly recommend you review your business practices to check how you will be affected, tax or otherwise.
Written by Shaima Todd