Submitted by Sestini & Co
| on Tue, 08/02/2016 - 20:17 | In Corporation Tax
The outcome of the UK’s referendum vote on 23rd June 2016 has raised questions for individuals and businesses alike. One of the questions we’ve been working on is whether the outcome has changed our advice for companies outside the EU considering setting up a business in the UK.
We take a number of considerations into account when giving tax advice in these situations, in areas from tax to the availability of potential employees with particular skills, and the particular market and industry sector within which the company trades. The referendum result looks set to affect many areas of business operations but won’t affect the geography, so a UK base still brings a physical location in the heart of Europe.
So what should you consider in our new operating environment?
Company and personal taxation
In comparison to other countries, the UK’s rate of corporation tax is low and set to fall to 19% from 1 April 2017 and 18% from 1 April 2018. The previous chancellor, George Osborne, had pledged to cut the rate to 15% and whilst the incoming chancellor, Philip Hammond, has yet to say whether he’ll honour the pledge, the importance of inward investment make it unlikely he’ll deviate far from that. Leading think tank, the Adam Smith Institute has even argued that Brexit gives the UK the opportunity to make sweeping reforms, perhaps even reducing corporation tax to zero over time. The new chancellor has said no Budget announcements will be made until the usual autumn statement.
Double tax agreements will continue irrespective of the UK leaving the EU as they are country to country bilateral agreements not bound by EU membership.
VAT is set to continue in some form and we may possibly become subject to a less complex tax regime in the future.
Employees and contractors
With free movement of people from EU countries into and from the UK unlikely to remain an option post-Brexit, some impact on skills availability from EU citizens may come into consideration. However, with today’s technology and ease of transport, employees no longer need be based in the UK or the EU in order to provide a useful and regular service to the company.
Location of prospects and potential clients
With the UK leaving the EU, if you have a considerable client base in the UK, you will need to have a UK-base in order to benefit from the UK’s favourable tax regime; we expect more stringent controls over this.
What should you monitor?
There may be changes to the social security position, corporation tax and changes to the VAT system. It is likely that changes would come in from 2019 and be signposted relatively far in advance.
What positives could emerge?
One result of Brexit currently is cheaper sterling, which could encourage more inward investment, particularly useful to fuel start-ups who require capital at the outset.
Investment in UK property could also prove attractive, with possible below-market bargains to be had while there is some uncertainty over the longer-term financial impact of the referendum.
Note: This blog offers our opinion, will vary from case to case and is not to be acted on.
If you’d like to check the impact of Brexit on your plans, call us on 01761 241 861 or email us. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.