Brexit and the tax implications – advice for business owners

Friend Partnership look at the potential tax implications post-Brexit and gives proactive advice on what to look out for in the upcoming negotiations.

It would perhaps be an understatement to say that there is still considerable uncertainty surrounding the potential financial and tax implications of Brexit for individuals and companies.

This uncertainty makes it very difficult for taxpayers to plan their affairs to accommodate any changes which Brexit might create. We have no clear idea yet whether there will be any direct or indirect post-Brexit tax changes. However, those businesses with cross border transactions are likely to face increased administration on transactions with non-UK customers.

Businesses should not sit on their hands in this hiatus period.

There are several issues you may wish to look at as the Brexit negotiations progress:

• Consider your business’s VAT and customs duty procedures to ensure that they are robust. Does the business have the necessary skilled staff to deal with any additional administration?
• Examine all the current tax reliefs available to the business and act to secure reliefs that may be lost or reduced post-Brexit, such as
• Maximise Research & Development claims;
• Consider putting in place an EMI share option scheme; and
• If you plan to raise capital from external investors, secure SEIS/EIS relief now.
• Consider your profit extraction methodologies and whether these need to be advanced and/or tweaked to accommodate potential direct tax increases.

The current financial and economic uncertainty may also give opportunities for business sales and purchases.

It is important for businesses to ensure that their financial and tax affairs are in order and that they have the necessary internal or external skills to enable them to cope with any potential changes. Flexibility is very important as this will enable businesses to move quickly and positively once any changes become apparent.

The uncertainty has prompted several businesses to set up operations elsewhere in Europe either as a replacement for, or in addition to, their UK operations.

If an overseas operation is part of your Brexit strategy, there are a number of key issues to consider:

• Structure: whether a branch, standalone company or a subsidiary of the UK company. Watch the tax anti-avoidance issues if you are transferring assets and activities abroad;
• Statutory filing requirements: make sure you understand the requirements for accounts, tax returns and so forth;
• Tax framework: make sure you understand the local and national tax regime and any other levies;
• Overseas profits: will you send this back to the UK or keep it in the country;
• Withholding taxes: interest, dividends, royalties and other items;
• Employment law and local practices: including payroll taxation and reporting obligations;
• Review the double tax agreement with the UK; and
• Costs and other commercial factors in setting up abroad.

There will be many changes following the UK’s exit from Europe many of which will affect the financial affairs of businesses and individuals in the UK. Some businesses are already acting, and others will need to consider what actions they may need to take as a matters progress. Sitting on the fence is not a solution.