The tax and wider implications of the Brexit deal.
A free trade agreement was agreed between the UK and the EU taking effect from 1 January 2021. The deal is fairly ‘skinny’ and focuses predominantly on goods, giving little detail on services. Under this deal, UK and EU goods are not subject to tariffs or quotas – as long as they meet specific ’rules of origin’ - however businesses that import or export from and to the EU are already experiencing a fundamentally changed process at the border. Customs declarations are required on either side, and businesses are having to put in place further preparations, including holding registrations and having the data to support these declarations. Duty is due on products that do not meet relevant ‘rules of origin’ – so various retail/wholesale/E-commerce supply chains may be impacted by ’double duty’. There are also implications for VAT on imports and exports, corporate tax and social security for cross-border workers.
The agreement contains provisions for coordination of social security for UK nationals travelling, working or living in the EU (and vice versa). This is discussed further in our separate article.
The immediate changes from a corporate tax perspective are that the UK has lost access to EU directives, leading to additional taxation on certain transactions. From 1 January 2021, the UK also no longer has access to the EU Arbitration Convention governing tax disputes. This is discussed in more detail in our previous article, the corporate tax landscape after Brexit, which was written before the deal was reached. The final agreement has not changed the position further.
The indirect tax impact of Brexit is also summarised in a previous article, Brexit the new regime for indirect taxes. The changes to VAT continue to be as described in this article. From a customs perspective, now that an agreement has been reached, we have confirmation that EU and UK goods will not be subject to tariffs however, as noted in the previous article, as long as those goods meet relevant ‘rules of origin’ – minimal processing or ‘import to re-export’ operations will not result in duty free admission – other duty reliefs and procedures will need to be considered. The agreement does not result in any further changes to the compliance requirements described in that article.
For further information on the free trade agreement please see our high-level summary which considers the broader implications for businesses going beyond tax. You can also listen to our recorded webinar on Brexit considerations for businesses in 2021.
For further information please contact :
© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.