Brexit – What next? | KPMG | QM

Brexit – What next?

Brexit – What next?

There is still considerable uncertainty around Brexit, but tax remains high on the agenda for many businesses and individuals.


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Despite the UK electorate’s decision last week, the UK remains in the EU for now. Nothing has changed in our constitutional arrangements overnight and as such it is still business as usual, albeit subject to a considerable amount of political and economic uncertainty. However, in the next couple of weeks and months further clarity over possible post-EU tax policy will emerge. We know tax is a high priority for many of our clients. Are you ready to answer questions about what might be next for you or your business?

In the wake of the referendum result, we held two Brexit webcasts. In the first, our experts gave their view on how Brexit will affect issues including funding, supply chain, tax and tariffs, and workforce. The second covered the potential impact of Brexit on public services. Both webinars can be listened to on our dedicated Brexit page.

We are receiving questions on hundreds of tax topics but the three biggest themes so far are the use of the UK as a holding company jurisdiction, the impact on the customs duties and reliefs in the supply chain, and the tax impact of restructuring being brought about by other changes such as the loss of regulatory passporting under some Brexit scenarios.

One area of high interest to multinational businesses is the impact of Brexit on UK holding companies. On leaving the EU, the UK will no longer be party to European Directives which provide for zero rates of withholding tax (WHT) on payments within the community. In many cases, the impact may be mitigated by either a nil rate of WHT under domestic legislation, or a favourable rate under the relevant double tax agreement. We may see alternative arrangements made under the terms of the future relationship between the UK and the EU to limit the exposure. Given the uncertainty, multinationals are naturally concerned about the potential tax cost, and may wish to consider their dividend policy for European subsidiaries to minimise any potential future WHT exposure.

The supply chain and customs impact depends heavily on the type of exit deal negotiated (e.g. EEA, EFTA or a looser arrangement) and the fact pattern of the company. However, because physical infrastructure takes a long time to restructure, it is important to begin scenario planning especially if the UK is woven into a complex multi-stage global supply chain. Some companies already started modelling scenarios before the vote, and for others now is the time to start.

Of course many other features of Brexit will have a knock-on tax effect. We recommend that you factor tax consequences and costs into any wider studies of, for example, the management of foreign exchange and liquidity, the free-movement impact on mobile UK and EU employees, or restructuring to retain EU regulatory passporting rights if the country exits the single market.

We expect that in due course there will be an opportunity for dialogue with the Government over the shape of our agreement with the EU, and in this regard any ‘real life’ examples that business can provide will be powerful.

With the full implications of Brexit still not clear, KPMG in the UK will continue to monitor developments and to keep you informed on the potential implications for you and your business. We’ll be releasing regular updates and insight into any developments as they occur – the best way to keep up to date is to register for our EU Referendum Forum. We will continue to keep you updated and share with you our insights based on the work and discussions we have been having with clients over recent weeks. If you would like to discuss the impact on your business specifically, please do get in touch.

© 2018 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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