Accounting and Brexit: where now?
It’s understandable that much of the talk around the impact of Brexit upon business has focused on the global multinationals. By definition, those businesses which have money flowing from one nation to another are going to experience the consequences of leaving the EU most obviously in terms of their operations. But what about businesses which operate wholly within the UK? How significant will the changes be for them?
The first key area where these businesses might experience changes is through direct taxation: either corporation tax or income tax on trading profit depending on whether the business is incorporated or not. However, it’s likely that any changes won’t be particularly noticeable, as the areas of the corporation tax code which have been influenced by the EU cover issues that UK SMEs are unlikely to be affected by.
The second key issue is that of indirect tax, in particular the future of VAT. The truth at this stage is that nobody really knows what will happen to this tax until the UK invokes Article 50 and the negotiations begin. Many in the accounting world feel that, even if we wave goodbye to VAT, at least in the short term something very similar will be brought in to take its place. If your business has a litigation claim based in the EU, however, whilst there is no reason to believe that Brexit will impact upon it, you might be inclined to have it dealt with sooner rather than later to avoid any potential complications.
At the moment, therefore, it appears that the vote to leave will have little impact on the direct tax position in the UK. Whilst indirect tax may experience a greater change, it will be one which comes through gradually rather than a sudden shift in taxation. The greatest changes look likely to be those brought about by the UK government itself. What is not yet known is whether Brexit itself will lead to policy responses by the government which result in alterations to the tax code. If the economy is in recession for an extended period, for example, this could erode the tax take, which in turn will most likely mean changes to the tax system which would very likely impact upon businesses in some way.