As announced at the Conservative Party conference last week, we now have some more information on the Brexit timetable and the initial mechanics of how the UK will implement its exit from the EU. Firstly, the Brexit timetable: Theresa May has confirmed that Article 50 (the formal notification for exit from the EU) will be triggered no later than 31 March 2017. This means that the UK should leave the EU no later than April 2019. This timetable will only be extended by the unanimous agreement of the remaining 27 EU member States, which at this stage, would appear unlikely.
The second announcement made by the Prime Minister was that new legislation, the ‘Great Repeal Bill’, will be introduced to end the supremacy of EU law in the UK. It is intended to convert all current EU requirements into UK law on the date of Brexit, annul the 1972 European Communities Act (the provisions which give EU law instant effect in the UK) and give Parliament the power to decide over time what parts of EU law it would like to keep or remove.
These announcements are important as they are the first step to providing a framework for the implementation of Brexit, and critically, they signal that the UK is committed to carrying through the result of the Referendum, to both the UK population and the international community. However, we should remember that the legal separation of the UK from the EU and the ‘Great Repeal Bill’ is just stage one of Brexit, and is widely regarded as the most straight-forward phase of Brexit. The challenges will be in setting up a new framework for trade (and broader international collaboration) in the post-Brexit landscape, including most critically the renegotiation of UK/EU trading arrangements and the negotiation of new trading arrangements between the UK and the wider international community (for example, those countries where the UK currently benefits from an EU-negotiated Free Trade Agreement).
The Chancellor’s speech at the Conservative Party Conference also mentioned Brexit, but what was perhaps most notable was the absence of any mention of his predecessor’s promise of a reduction in the Corporation Tax rate to 15 percent post-Brexit. Philip Hammond did refer to the planned reduction in the rate to 17 percent, but the absence of any mention of a 15 percent rate increases the likelihood that this proposal has been quietly dropped by the Treasury, as has been suggested in the media.
It is in these post-Brexit phases that we expect to see the most significant tax implications. There will of course be customs duty implications of the new trading arrangements, which will have a direct impact on many businesses. However, we also expect to see changes to immigration laws, as well as changes which are likely to have an impact on direct taxes and employment taxes. So whilst last week’s announcements have been helpful, they do only relate to the very start of the Brexit process.
These recent announcements were covered in our KPMG Global Brexit Webinar (Brexit: 100 days on – a view of tax) on Wednesday 5 October, along with further commentary and analysis of the tax implications of Brexit for multinational groups. The slides and recording of this event are available on our website.
If you have any questions or would like to discuss the impact of Brexit on your business, please get in touch with your usual KPMG contact or Tim Sarson (Direct Taxes) or Chris Barge (Indirect Taxes and Customs Duties).
For further information please contact :