The fifth anniversary of the referendum has led to quite a lot of discussion about the impact of BREXIT.
In terms of tax, the UK was required to abide by all the EU directives on taxation up until the 31st of December 2020. There has only been six months for any divergences to occur.
Issues over VAT have been significantly overshadowed by some of the health issues over products such as shellfish and chilled foods such as sausages.
Generally, the VAT system has bedded down relatively well.
In terms of Direct Taxation, the UK has started to diverge from the European system, such as imposing withholding taxes on interest and royalty payments from the 1st June 2021.
The UK also gutted DAC6 which would have imposed significant additional burdens for intermediaries regarding tax transactions.
I think that the action over DAC6 accurately foreshadowed the attitude which the UK will take to EU regulations. Where a new regulation is proposed which requires significant work for it to be implemented the UK is likely only to do so if it is consistent with the OECD agreements. By contrast where a regulation has been in existence for many years and therefore its compliance is “priced in” to its operation, the UK is less likely to repeal the legislation.
Finance Act 2021 was cautious about taking advantage of the UK’s new freedom of manoeuvre in taxation. There was no wholesale “bleaching” of EU inspired tax laws. What is more likely is that as the EU adopts rules which diverge or go further than the OECD the UK is unlikely to follow and therefore divergence will increase over a number of years.
