The surprise result from the EU Referendum no doubt means a period of uncertainty and change, likely to last years, rather than weeks. Whilst the EU does not currently specifically dictate tax rates and regulation, it does impose bands and rules within which EU members have to operate.
Furthermore, with economic growth at risk and anticipated relocation of some international brands out of the UK, the Chancellor will be looking for ways to stimulate the economy in the immediate future.
So what tax changes might be on the way?
- Corporate tax rates – the Chancellor announced in the last Budget that over the next few years, the Corporate Tax rate will drop from 20% to 17%. We could well see an acceleration of this reduction in the Autumn Statement.
- Annual investment allowances – this relief gives an immediate deduction of 100% for the investment in capital equipment. The limit is currently £500k. Large companies spend heavily in this area and an increase to £1m+ could well stimulate an increase in spending.
- VAT – over the last 10 years, the rate of VAT has jumped between 17.5%, 15% and 20%. As such, it is currently sitting at 20% being the highest rate since the 1970’s. A cut in VAT would be welcome for many businesses selling to consumers, although it does little to help international customers.
- Non-Dom’s – over the last 5 years, the government has significantly increased the tax burden and complexity around the tax issues of non-domiciled individuals. These are individuals who are resident in the UK, but who consider their long term home to be outside the UK. If the UK is trying to send a message to these individuals that they are still welcome in the UK, a relaxation of the tax rules might be on the cards. Although given George Osborn has been at the forefront of these changes, a change in this area may only come about if a government reshuffle affects the Treasury.
- Transfer pricing regulation – rules already exist to protect the UK exchequer from lost revenue as a result of the manipulation of tax charges across international borders. Leaving the EU may well result of a review of the legislation to further close any tax gap.
Economics teaches us that in times of uncertainty, consumers keep their money in their pockets for a rainy day, which in itself exacerbates the problems further. With the fallout from the referendum dominating the media and many worries about the country’s economic future, the government will be doing all they can to send the message that the country remains ‘open for business’ and trying to convince consumers that a prudent and sustainable contingency plan is in place. More than ever, directors need to ensure that their business is as robust, compliant and efficiently organised as possible to confront the coming months and years. Only time will tell.