The impact of Brexit on the UK tax regime
February 23, 2017
Brexit offers some interesting possibilities in terms of the UK’s tax regime.
Whilst the world of UK direct taxation has been only lightly influenced by the UK’s membership of the European Union, the same cannot be said about VAT.
Indeed, VAT was introduced in 1973 to finance the UK’s contributions to the European Union and is inextricably linked to the Union in terms of its core principles and legislation. Whilst I don’t think Brexit will herald the scrapping of VAT, the post-Brexit era will see the UK free to change its VAT rules as it sees fit rather than having to adhere to legislation and case law which is created in Brussels or Strasbourg.
Moreover, will the Scots seek further devolution or even full independence as a consequence of the UK’s Brexit vote? We have already begun to see Scotland exercise its own tax raising powers by refusing to raise the personal allowance threshold in line with the rest of the UK. Will we see, for example, the top rate of income tax increased above the 45% rate which exists in the rest of the UK? Time will tell.
Blog by Brian Wood, Corinthian Tax LLP.