We are the voice of insurance and long-term savings | Contact us

Brave New World

And thus after 47 years’ membership the UK leaves the European Union, in an atmosphere strangely muted for 11pm on a Friday night at the end of dry January. Given little will change until 31 December, a feeling of anti-climax after such seismic change is probably inevitable. Now the UK is free to seize the opportunities afforded by Brexit, from which a distant observer of the process might assume the UK economy is dominated by fishing and farming. ”O brave new world, that has such people in it!” Whether Shakespeare had Dominic Cummings in mind has not been established to a certainty.

The business pages are filled with speculation about the impact on the UK economy at a time filled with change - with a new PM, a new Chancellor and shortly a new governor at the Bank of England. Given the government’s unaccustomed majority, the sense is of a sudden freedom of choice, although the new administration has social and economic promises to keep.

iStock-1184166834.jpgThere are no immediate tax changes caused by Brexit – VAT rules for goods and services alike remain the same (see below), and even the jurisdiction of the CJEU remains intact for this calendar year. The negotiations regarding the future trade relationship start in March, but the government hopes to move the conversation on and relegate Europe to the back pages. By that time, some big decisions in the PM’s in-tray on his arrival may have been taken, though the consequences will not be apparent for some time.

With a Budget almost exactly two months after the election and less than six weeks after Brexit, the Chancellor is likely to do little more on 11 March (tbc) than set the tone and produce some quick fixes, tax giveaways being limited at this point to a NI threshold increase (loose campaign talk of bigger plans shelved for now). The ABI is asking for a cut in the IPT standard rate as part of its ongoing campaign against increases. We expect a Spending Review in the Summer and perhaps an Autumn Budget to prepare for the post-transition period. A roadmap for the years ahead would be welcome.

HMRC announced on 31 January that new VAT regulations had been introduced, effective that day, to enable the current VAT recovery position for UK supplies of financial services to remain exempt with no input tax recovery. (Had this housekeeping not been done, financial services within the UK would have become effectively zero rated by virtue of being supplied to a non-EU territory). How the UK proposes to treat the supply of financial services to the EU after the transitional period remains uncertain – but the logical basis for distinguishing between EU countries and others is not clear.

Making a busy day of it, the OECD announced on Friday 31 January that the Inclusive Framework of 137 member countries had affirmed their commitment to reach an agreement by the end of 2020. This was accompanied by a Statement setting out further details of Pillar 1 and an update on Pillar 2.

This and other tax issues for 2020 will be discussed at the ABI/Pro-Tax breakfast event on 31 March – this event is free and early registration is therefore encouraged.

Last updated 07/02/2020