On 23 August 2018, the Government published a series of technical notices providing guidance on how UK businesses and citizens may be affected if the UK leaves the EU without a deal on 29 March 2019.
These notices include specific guidance on the impact of a ‘no deal’ scenario with respect to the financial services sector and VAT. Further technical notices are expected to be published in September.
In a ‘no deal’ scenario, EU passporting rights and EU regulation would no longer apply to the UK businesses operating within the European Economic Area (EEA). UK businesses operating within the UK and any EEA firm operating from a UK subsidiary would remain unaffected.
We have summarised the key points below:
Temporary regimes for EEA businesses operating in the UK
The Government plans to introduce temporary authorisations to allow EEA businesses to continue operating within the UK, in order that they can obtain authorisations from UK financial regulators during this period:
- For a period of 3 years from 29 March 2019, EEA firms will be able to operate within the UK under a Temporary Permissions Regime (TPR).
- A similar approach is expected for electronic payment providers, information service providers, EEA funds and non-UK central counterparties.
UK businesses operating in the EEA
UK businesses operating within the EEA may lose access to certain protections and information. A few specific examples are:
- EEA customers of UK firms could be affected if the UK firms are unable to access certain services without passporting rights. This could lead to contracts not being fulfilled.
- UK firms using EEA trading venues may not be able to undertake certain derivative and equity transactions.
- It may no longer be possible to settle EU securities in the UK under the UK Central Securities Depository (CSD).
Financial Market Infrastructures (FMIs) may no longer benefit from certain protections such as insolvency actions.
The key points relevant to businesses in the financial services sector are:
- No EC Sales Lists will be required for sales to EU business customers. However, the general place of supply rules for supplies of services will remain unchanged.
- The input VAT deduction rules for specified financial services provided to EU based customers may be changed, further guidance will be released on this.
The guidance also provides useful confirmation regarding postponed accounting for imports, which will be relevant for businesses that move goods into or out of the UK.
Businesses that have undertaken internal planning exercises and may be planning on moving trade and assets from the UK to other EU member states should consider the VAT treatment of such transfers as well as the wider potential impact on their supply chains.
Working with you – can we help?
Smith & Williamson can support your business through this period with our structuring and VAT services.
If you are interested in discussing this and the impact this may have on your business further, please let your Smith & Williamson contact know and we can put you in touch with our appropriate specialists.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.