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UK leaving the EU: Direct and indirect tax implications

The potential impact of a Brexit on tax

The vote in favour of leaving the EU could have implications for direct and indirect tax in the UK after secession.

Overview

In the short term, the vote in favour of leaving the EU will have little, if any, immediate impact on indirect or direct taxes. Few changes are likely to occur while the secession negotiations take place. The potential future relationship between the UK and the EU is unclear. A close association is likely to have less impact on many tax issues, but a more remote link will have a greater impact.

Key findings

The paper analyses the direct and indirect tax implications for the possible alternatives to membership of the EU:

  •  For indirect tax, there is likely to be a significant impact on Customs Duty and VAT, where the UK would need its own taxation systems. Transactions to/from other EU states would become imports and exports with potential impacts on systems and cash flow. Other indirect taxes would be largely unaffected
  •  For direct tax, relevant EU law; what could change if the UK left the EU; State Aid rules and Harmful Tax Practices.

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