David Currie CA: post-Brexit VAT, the main challenges for indirect taxes and the growth of environmental tax
The Convener of the Indirect Taxes Committee and Tax Board member, David Currie CA, discusses VAT after Brexit, the rising importance of environmental taxes and why he recommends an indirect taxes career.
What does the Indirect Taxes committee do and what is your role?
The key focus of the Indirect Taxes committee is to coordinate ICAS’ contribution on indirect tax matters and ensure that the views of ICAS and its membership are represented to the UK government, HMRC, HMT and the OTS.
The committee aims to support the Tax Board with its wider Policy initiatives and ensure that ICAS plays a key role in contributing to indirect tax matters, both in the UK and across Europe.
My role is to help set the agenda for the committee, to chair committee meetings, and to ensure that the committee’s outputs (responses to consultations, position papers, etc.) are delivered. Charlotte Barbour (ICAS Director of Taxation) and Susan Cattell (ICAS Head of Tax Technical Policy) provide valuable support to myself and the committee in ensuring that all of this is achieved.
As a member of both the Tax Board and the Indirect Taxes committee, what are the main differences between them?
The Tax Board has oversight for all tax work that ICAS carries out, and has a key role is helping to shape the overall tax strategy put forward by ICAS.
There are five separate committees which report to the Tax Board, one of which is the Indirect Taxes committee, and each committee considers individual areas of tax in greater detail.
As a consequence, the main difference is that the Tax Board deals with a wide range of taxes and ICAS policy at a macro level, whilst the Indirect Taxes committee has specific responsibility for coordinating ICAS’ contribution on indirect tax matters.
What are the main tax challenges for indirect taxes?
In the current economic environment, I’d say there are two key challenges for indirect taxes:
Interpretive issues with VAT law – tax law can be extremely complex and one of the key challenges for businesses and their tax advisors is the interpretation of this law.
As VAT is a transactional tax, VAT law must be interpreted and applied to each sale and purchase a business makes, which can often have differing fact patterns and require different legal interpretations. The ever-changing legal and regulatory environment in which today’s business is conducted adds a further dimension to this challenge.
Move towards digital VAT reporting – VAT will be the first tax requiring compliance with HMRC’s Making Tax Digital programme. Businesses will need to ensure that their systems and processes are ready from April 2019 (or October 2019 for more complex businesses) to comply with the new digital record-keeping and reporting requirements.
The UK’s approach to tax digitalisation is not unique, with an increasing trend across Europe towards the real-time, electronic reporting of VAT. Ensuring compliance with tax digitalisation is a key challenge for businesses, both small and large, local and global.
Why would you recommend a career in VAT?
Working in VAT provides an interesting and varied role and the opportunity to learn and apply a wide-range of intellectual, presentational and interpersonal skills.
As VAT is a real-time tax which must be considered for every business transaction, it provides opportunities to collaborate with non-finance professionals, learn in detail about a business’ activities and contribute to commercial decisions.
If you enjoy working with people, the challenge of problem-solving and an ever-changing, dynamic working environment, then a career in VAT is for you!
How important do you think environmental taxes are?
Environmental taxes certainly have a role to play in shaping behaviours. How these taxes are structured, however, is key to ensuring that they achieve the overarching environmental aim.
This can be a complex and challenging policy area, and care must be taken to avoid unintended consequences.
Given the importance of environmental issues in today’s society, the committee is also in the process of drafting a position paper.
The Indirect Taxes committee has worked with the ICAS Sustainability committee in recent months to consider some of the issues around single-use plastics, and how tax could be utilised to deliver a better environmental outcome.
Given the importance of environmental issues in today’s society, the committee is also in the process of drafting a position paper, again in partnership with the ICAS Sustainability committee, in relation to environmental taxes.
Do you think VAT will change significantly after Brexit?
It is inevitable that there will be changes to the UK VAT system after Brexit, although the extent of these changes is not yet clear. Post-Brexit, in the longer term, the UK is unlikely to be bound by the EU VAT Directive or the judgements of the European Court of Justice.
It is expected that, at some point, the UK will have autonomy to sets its own VAT laws and could, in theory, abolish VAT altogether. The UK government has, however, confirmed its intention to retain VAT, which is unsurprising given that it contributes around £130bn (17%) annually towards UK tax revenues.
Changes will most likely arise in areas where the UK have been at odds with the EU VAT rules historically.
Immediately post-Brexit and after any transitional period during which EU law would be expected to continue to apply in the UK, businesses which trade goods with the EU can expect some changes to the way in which VAT is accounted for on these goods. The extent to which any changes are required, however, is very much dependent on whether there is a UK-EU trade deal and, in the event of a deal, the terms of it.
In the longer term, changes will most likely arise in areas where the UK have been at odds with the EU VAT rules historically – for example the zero-rating of sanitary products, the scope of the insurance exemption and the zero-rating applied under the Terminal Markets Order.
As with all matters Brexit, however, we will have to wait and see!
Why do you give up your time to volunteer with ICAS, and would you encourage other CAs to get involved?
I would absolutely encourage CAs to get involved with ICAS. It’s vital that ICAS hears the views of all members to ensure that it can represent its membership appropriately.
Volunteering also provides a great opportunity to develop both professionally and personally, network with fellow ICAS members, and contribute towards the wider tax agenda.
How does your employer support your work with ICAS?
BlackRock are very supportive of my work with ICAS, allowing me the flexibility to get fully involved with the Indirect Taxes committee, Tax Board and other ICAS events. BlackRock is committed to making a positive contribution to society and to developing its employees, and volunteering with ICAS meets both of these aims.
If you are interested in learning more about volunteering opportunities at ICAS please get in touch.