UK Tax Implications of Brexit Vote
The past seven days in the UK has been one of the most historic in recent times from a political perspective as Britain voted to leave the EU. As the dust settles on the intriguing Brexit vote, many corporates and small businesses have turned their attention to how the vote will affect their business in the long term. Much of this conversation has turned to the tax implications of Brexit on UK based businesses and also businesses abroad who are liable to pay some form of tax. A recent write up by Mazars, one of the largest accountancy firms in the UK has outlined some of the potential tax implications of Brexit that are worth considering. Within the piece, they touch on potential implications in regards to indirect and direct taxes, European directives and share schemes amongst others. Importantly for many of our clients who hire from from both local and international talent pools will be the implications on employee mobility. Mazars mention that the employers could expect the UK government to extend the existing points-based system currently in place for non EU nationals to EU nationals. Here at International Tax Search, we would imagine that the high skilled labour which is required by many professional services firms would not have many problems passing the points based system which is designed to benefit highly qualified professionals. We will be watching with keen intent on the real implications of Brexit over the next 18-24 months.
The article states:
UK workers in Europe are only required to pay social security contributions in one Member State. Again, it is to be hoped that an agreement can be reached so that such arrangements can continue, otherwise workers and businesses will suffer additional costs.
Employers of European nationals will be questioning what Brexit means for them and their employees going forward. The campaign placed so much emphasis on immigration that it will probably be fairly high up on the agenda once negotiations begin. The UK would probably look to extend the existing points-based system for non-EU nationals to EU nationals, subject to relaxations to meet European Economic Area requirements.
The effects are likely to affect low-paid, less skilled roles, so it is very possible that for the first time since the introduction of the PBS back in 2008 we will see more stringent points-scoring criteria and selective relaxations for specific sectors or industries where we are experiencing shortages. An overall cap on numbers is also a very strong possibility given the current climate.
The greatest certainty is that there will be costs involved unfortunately, both for the UK employer and the migrant themselves, as well as additional likely administrative burdens. Employers should factor in the need for Brexit reviews of global mobility costs and risk plans for the next two years onwards.
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