‘God Save the Brexit’ : Tax Implications of Leave Vote

This study was drafted shortly after the announcement of the referendum by which the United Kingdom decided to leave the European Union. In this article, the authors make a comprehensive assessment of what would be the tax consequences attached the decision. The article is of interest not only for this specific case but also for any other EU Member States deciding to leave the Union. The article starts to note that although the results of the exit referendum have been confirmed, the tax implications arising from the United Kingdom leaving the European Union will not be known until the United Kingdom invokes article 50 of the Treaty on European Union (TEU). Thus, no immediate changes have been triggered regarding the terms governing transactions carried out between the United Kingdom and other EU Member States; the United Kingdom will continue to be engaged in decision-making at the EU level as it did before. Even once article 50 is invoked, the United Kingdom will still be bound by all EU law up to the moment that the terms of the exit have been established. It will not, however, be involved in decision-making during that time. Article 50 provides for a period of at most two years between the moment it is invoked and the Member State's actual exit from the European Union. Hence, while legislative changes may not be made immediately, the effects that an exit will have on the UK tax system are expected to be significant. The most significant impact of the Brexit is likely to be on indirect taxes, as these are already harmonized at the EU level. In addition, the applicable rules in many areas of direct taxation that stem from EU primary or secondary law are also expected to change significantly, as the United Kingdom will become a non-Member State with regard to the application of the fundamental freedoms and the European directives. Significant developments will also occur in other areas, such as administrative regulations and social security. These are analysed in detail herein