The UK will leave the EU on 29 March 2019 with the European Union (Withdrawal) Act 2018, but is yet to reach an agreement with respect to what the relationship with the EU will be after the exit. It is expected that there will be a transition period from 30 March 2019 – 31 December 2020.
We are advising a number of Financial Services clients on their Brexit planning arrangements.
Typical tax issues
Generally, the focus is ensuring that businesses can continue operating and engaging with EU clients post-Brexit, even under a “no deal” scenario. This includes having appropriate EU entity passporting rights in order continue engaging with EU clients.
Typical issues that we are advising on include:
- The appropriateness of existing corporate holding structures post-Brexit, particularly if EU tax Directives are no longer applicable.
- Transfer pricing arrangements between EU entities with passporting rights and other group companies.
- The corporation tax implications of moving existing operations out of the UK. For example, exit charges, capital gains and withholding taxes.
- Whether EU corporate structures or branch structures are appropriate, and the tax obligations that will need to be complied with.
- Whether diverted profits tax could apply.
- Tax efficient funding of new EU entities.
- Tax residency and substance requirements for EU entities.
- Employment tax issues such as:
- Tax implications of Short Term Business Visitors and appropriate employment arrangements.
- Payroll and social security implications for mobile employees.
- The implications on existing and future share option arrangements for mobile employees.
- VAT issues such as:
- Whether “Transfer of a Going Concern” provisions apply to transfers of trade and assets.
- The VAT treatment of intercompany charges.
- As a result of many Financial Services businesses being unable to recover the VAT they incur in full (i.e. being “partially exempt”), the above could result in a VAT cost if appropriate planning is not undertaken.
- Changes in UK VAT law, in particular deviations from EU VAT law.
- We previously considered the VAT implications of a “no deal” scenario in our Briefing Note.
- Personal tax implications for mobile individuals.
Providing international tax expertise
Our international network gives our clients access to a fully inclusive suite of assurance, tax and business services through more than 600 offices in over 100 countries – including all EU countries.
How we can help
There is no “one size fits all” solution. The steps that need to be undertaken will depend on your existing corporate structure, operations, client profile and future business plans. Smith & Williamson would be pleased to work with you to understand your requirements and provide advice tailored to your circumstances.
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.