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With the prospect of a ‘no deal’ Brexit becoming increasingly more likely, there are a wide range of issues that multinational companies, in particular, must consider when deciding on where to locate offices and staff: from tax and remuneration strategies, to the potential need for work visas.
The result in the UK parliament’s vote last night on Theresa May’s Brexit deal went pretty much as expected with the government being roundly defeated. There was no surprise here although the scale of the defeat was perhaps larger than the cabinet anticipated. So the question now is, “where do we go from here?”.
The UK has released a white paper examining possibilities for its post-Brexit customs system once it leaves the EU’s customs union, and a more revealing report by Ireland’s Revenue has added further detail.
No Deal Brexit?
The odds of a no deal Brexit currently stand at around 25% [source: oddschecker.com]. Yet according to research by the British Chamber of Commerce, 41% of UK businesses have yet to complete a no Brexit risk assessment.
While the situation remains unpredictable, defensive measures should be considered at the earliest opportunity. These include:
- Supply chain: possible border delays impacting supply chains and the potential for double duty costs becoming embedded in transaction prices and negatively impacting margins
- People management: is the best structure to keep and have access to talent in the future to set-up an office in Mainland Europe? Is there a risk to your business of double social security costs without any ‘double tax treaty’ offset?
- European structure: for groups where there is a UK holding company with numerous subsidiaries, the main concern is whether an additional layer of tax will apply post Brexit once the implementation of the EU’s Parent-Subsidiary Directive no longer reduces dividend taxes from an EU subsidiary to the UK parent company. This may lead to an additional compliance burden to ensure treaty benefits are available
- VAT: the VAT treatment applicable to certain transactions will change, and systems may need to be reconfigured to deal with those changes. Additionally, several processes driven by the UK being in the EU will change: UK businesses will need to adopt processes required by non-EU businesses
To discuss how to turn Brexit and defensive measures into a strategic expansion for your business, contact our Brexit specialists today.