As the Brexit date approaches, companies’ various plans are maturing. Many British banks have set up entities in the EU, relocated parts of their workforce, and rewritten their models to adjust to the new UK/EU relationship—whatever that will ultimately be. Likewise, EU entities have set up plans for doing business in the UK after 29 March 2019, Brexit’s (current) go-live date.

On this page we take a closer look at the actions and reactions in the banking sector. Keep reading for the main Brexit impacts, to-do lists for entities in these sectors, companies who have already relocated, and other valuable insights.

Banks that have announced relocation to Luxembourg

banking relocation to Luxembourg

Brexit impact

  • Financial institutions are likely to be faced with considerable uncertainty, complexity, and cost as the UK regulatory regime adjusts in the new post-Brexit world and as further divergences in regulatory and supervisory approaches inevitably emerge between the UK and the EU.

    This adjustment will include the rewriting of the PRA and FCA rule books to reflect the position of the UK outside the EU; the divergent paths followed by the UK and the EU in the detailed implementation of international standards; and the UK following its own path, in some areas moving ahead of international standards and EU legislation.

  • What has been less discussed is how tax rules, and possible changes to them, will become an important element in that decision. Quite apart from the effect it would have on Britain’s position as a global financial center, questions around tax will play a major part in banks’ ability to attract and retain staff, keep a handle on staff costs, determine their exposure and readiness for new global tax rules, and ultimately affect profitability itself.

         - Banks will have to think about the tax consequences of changes to their operating model—moving   assets and people for example—and all that will have to be studied to assess the risks and opportunities.

         - EU legislation has a major influence on corporate tax. In addition, indirect taxes such as VAT and customs flow directly from the European Union. The UK will now have the opportunity to change these

A ten-point to-do list

  1. Entity and capital restructuring due to required reorganization: model tax implications of any required reorganization; evaluate potential exit charges, indirect taxation implications, and transfer pricing.
  2. Staff relocation: model tax implications on payroll, social security, and personal tax costs.
  3. Proposed alternatives to EU membership: monitor implications of emerging exit terms.
  4. Possible revision to EU tax directive requirements: assess impact of EU and UK policy revisions.
  5. Changing UK landscape: implement any tax changes and evaluate opportunities arising from competitive policy revisions.
  6. EU competitive initiatives: monitor EU and global policy revisions for opportunities.
  7. Impact on indirect taxation: monitor EU and UK legislative revisions.
  8. VAT process: monitor EU and UK legislative revisions.
  9. Loss of binding arbitration: monitor EU and global policy revisions.
  10. Non-applicability of EU tax developments: monitor developments—especially in areas such as the EU anti-avoidance tax package and BEPS.

Connect with us