After Brexit - what can individuals expect?

29 June 2016

Gary Heynes and Joan Foster

Reflecting on the referendum, it is fair to say that we rarely see a time when individuals are not faced with some uncertainty. The outcome of this referendum is no different and, as with every Budget or Autumn Statement, the only certainty is that there are sure to be some winners and some losers as a new tax regime evolves outside of EU oversight.

Losers

Being part of the EU does have its benefits and an element of protection. We have previously reported on cases heard in the European Court of Justice where it has ruled in favour of EU taxpayers because another EU country has treated them more harshly than local residents. This includes social security charges on property sales in France, inequitable inheritance tax laws in Spain and capital gains reliefs in Germany only available to residents. It is reasonable to conclude that such protection will not be available in the future and EU countries will be able to treat UK residents as they wish, with no concern for discrimination.

Winners

Whilst protection may not be available, we could see greater benefit in an independent tax system. For example, under current rules when new tax reliefs are proposed, EU 'state aid' approval is needed. This applies to reliefs such as the enterprise investment scheme (EIS) and social investment relief to ensure that such reliefs do not provide a disproportionate advantage to organisations which would be uncompetitive. With the UK breaking away from EU regulation, we could be free to introduce greater tax reliefs to benefit who we choose on our own terms and open further opportunities for tax efficient investments.

Stability

We should also consider whether now is the time for stability in the UK, especially amongst wealthy individuals who can easily relocate if they consider the UK is no longer a suitable jurisdiction for them; the referendum has already held up around 40 pieces of tax legislation and this includes significant changes for non-domiciled individuals, due to come in to effect from 6 April 2017. 

The Government will need to ask itself whether this is a good time to impose greater taxes for the wealthy. With the uncertainties Brexit has created, the anticipation that a new government will not be formed until the Autumn and the likely need to ensure that the UK remains attractive, delaying significant changes for non-doms may well be more appropriate.

Winners and losers aside, the real impact of our withdrawal from the EU remains to be seen and will now largely depend on who leads which government.

If you would like any more information on this issue please contact Gary Heynes, Joan Foster or your usual RSM contact.