Brexit 20 Questions: Latest updates from ICAS
A summary of updates to the ICAS Technical Team’s answers on our Brexit 20 Questions.
ICAS published 20 Questions for Government and policy makers following last month’s vote for the United Kingdom to leave the European Union.
Since then, the ICAS Technical Team has been seeking to provide answers to these questions and to update the answers as new information comes to light.
We’ve just published a series of updates in the pages and you can read summaries of these updates below.
- ICAS Brexit answers: Business and trade
- ICAS Brexit answers: Bridging the policy gap
- ICAS Brexit answers: Taxation and accounting
Business and trade updates
We’ve updated Question 1 (what immediate steps will be taken to minimise the impact of Brexit).
We noted that on 14 July the Bank of England’s Monetary Policy Committee decided to hold the main interest rate at 0.5% despite considerable speculation beforehand about a rate cut to provide economic stimulus. However, it would appear that a rate cut is likely to happen in August. Find out more.
Question 2 examined the prospect of an emergency Budget.
New Chancellor Philip Hammond, like his predecessor George Osborne, has ruled this out. Attention will now be focused on the new Chancellor’s first Autumn Statement. It has already been highlighted that a change in direction in terms of economic policy is likely with the envisaged time period over which the UK is likely to remove the annual funding deficit being extended. Find out more.
Question 3 was about the prospects for foreign investment going forward.
The New Prime Minister Theresa May has appointed David Davis as Secretary of State for Exiting the European Union and Liam Fox as International Trade Secretary. Mr Davis said striking deals with non-EU countries would be a priority and Chancellor Philip Hammond said he was committed to kick-starting investment paused by the Brexit vote. Find out more.
Bridging the policy gap updates
We asked ‘when is the UK Government likely to trigger Article 50 of the Lisbon Treaty?’ in Question 1 of Bridging the policy gap.
Brexit Secretary David Davis said the UK should be in a position to formally trigger the process "before or by the start" of 2017. Find out more.
Question 3 asked on what date the UK might no longer be a member of the EU.
If Article 50 of the Treaty on European Union is invoked by the UK in late 2016 or early 2017, as hoped for by Brexit Secretary David Davis, then Mr Davis believes that the process could be concluded by December 2018. However, we have emphasised that there is no provisional timetable for an exit as yet. Find out more.
In Question 4 we considered the parliamentary aspects of the Brexit process and whether MPs will vote it through, given opposition by many.
It is unclear as yet whether the UK Government can invoke Article 50 without an Act of Parliament. Momentum appears to be gathering behind the view that an Act of Parliament will be required before Article 50 can be invoked. However, regardless of the legalities it would appear almost certain that Parliament will respect the result of the recent referendum. Find out more.
Fresh constitutional uncertainty and opposition to Brexit from nationalist parties in Scotland and Northern Ireland was the topic for Question 5.
One of PM Theresa May's first official engagements was a meeting with Scotland's First Minister and Scottish National Party Leader Nicola Sturgeon on 15 July. Mrs May said she was committed to building a consensus on the way forward, and for Scotland to be "fully engaged" in Brexit talks. Ms Sturgeon said she was focused on "protecting Scotland's interests" and would be "open to examining all options". The PM has yet to meet Northern Irish parties. Find out more.
Taxation and accounting
While the UK has always had primary control over taxation, in Question 1 we asked if it would now be more inclined to go its own way completely and ignore European and international convention.
On the international stage, the UK has been in a leadership position in the Organisation of Economic Cooperation and Development (OECD) discussions on Base Erosion and Profit Shifting (BEPS) and we would expect such considerations to remain relevant.
Brexit does have implications for international groups that operate in the different EU states including the UK, and UK holding companies. For example, they could face the potential loss of the use of the Parent-Subsidiary Directive and Interest and Royalties Directive, with potential tax impacts. Find out more.
We asked if the UK Government would change its approach to VAT when it is no longer bound by EU rules, in Question 2.
Radical short term change would seem unlikely short term, given that VAT is a major source of tax revenue. Longer term, there will be no need for referrals to the European Court of Justice on VAT matters so the tax is likely to become more bespoke to the UK. One of the Government’s considerations for the future will be how much resource would be available in HMRC to enact any significant change, given the drive to reduce HMRC manpower.
There is the potential for VAT to become a more significant compliance burden for international businesses going forward and likewise this could also be the case for Customs Duties. Find out more.
We explored the prospect of an emergency budget and the potential for an end to the triple lock on income tax, VAT and national insurance to raise revenues in Question 3.
As stated in Question 2 Business and trade, an emergency budget has been ruled out. However, decisions need to be made now about whether to go ahead with releasing all of the expected consultation documents and whether the promise not to raise income tax, national insurance or VAT rates during this parliament will be maintained in the next budget. Find out more.