Brexit Bill: lack of legal continuity means uncertainty, say tax advisers

The European Union (Withdrawal) Bill fails to meet the Government’s objective that the same rules and laws will apply on the day after leaving the EU as on the day before, the Chartered Institute of Taxation (CIOT) has said. The Institute believes that this will lead to damaging uncertainty for taxpayers and government alike.

In a submission to the Department for Exiting the European Union (DExEU) ahead of the Bill’s committee stage the CIOT argues that the uncertainty arises where the Bill deviates from its primary purpose: which is to preserve the existing law as at exit day. Specifically, most of the complications arise as a result of the Bill not giving full effect, at least initially, to the general principles of EU law, given the impact they have had on decided cases about, or applicable to, UK tax issues.

These general principles include the principle of ‘abuse of rights’ which currently operates to protect HMRC from egregious tax avoidance in the sphere of VAT. CIOT’s submission states: “On the face of it the Bill would seem to (presumably inadvertently) retrospectively remove this protection.”

Jeremy Woolf, Chair of the CIOT’s EU and Human Rights sub-committee, said: “The Government have been clear that their intention with the EU (Withdrawal) Bill is to provide legal continuity during Brexit by copying over the entire body of EU law onto the UK’s post-exit statute book. This is a sensible aim.

“However, as currently drafted, it appears to us that this will not be the case. In particular this applies to the ‘general principles of EU law’ which will not be incorporated into UK law by this Bill. This is despite the fact that the UK courts have given effect to these principles for a number of years. By not giving full effect, at least initially, to the general principles of EU law, the Government are altering individuals’ rights – and the right of government departments and other bodies to bring cases too - without any consideration of the desirability of the changes. This is likely to cause considerable uncertainty about whether previously decided cases remain good law. These problems are increased by the failure to make it clear what should or should not be considered a general principle of EU law.

“It is particularly surprising that the ability to rely on the general principles of EU law is being removed retrospectively unless proceedings have been commenced before Brexit day. This is inconsistent with the general principle that changes to the law should just be prospective.

“Of course, if the consequences of the general principles of EU law on existing UK law are considered unsatisfactory in the future, the law should be able to be changed by Parliament. But this should be done at a time when there can be a fuller discussion and consideration of the implications of the change.”