Brexit: Tax implications for Scottish businesses

An emergency budget drawn up as a result of last week’s vote to leave the European Union could have significant tax implications, according to a leading Scots accountant.

Martin Bell, tax partner at accountancy and business advisory firm BDO LLP, said while nothing way happen immediately, Scottish businesses and their bookkeepers must be prepared.

He explained: “The vote for Brexit may have little immediate impact beyond increased volatility in the currency markets and stock markets. However if there is an Emergency Budget designed to calm markets, this may bring substantive tax changes fairly quickly.”

“In the longer term, the effects on business could be more fundamental and are unlikely to make it easier to do business within the EU. How much more difficult EU trade becomes will clearly depend on the terms the UK can agree for Brexit but this may not become clear for many years.”

“In the meantime, uncertainty over the UK’s relationship with the EU will continue for months or years, creating a drag on the economy as businesses and consumers take a wait and see approach to investments and major purchases.”

“In addition to the anticipated UK tax complexities and changes that Brexit will bring, there is the additional dimension of devolved Scottish taxation for Scottish businesses and individuals to factor it. At present the Scottish Government will have full power over income tax on non-savings income from April 2017 and prior to the Scottish independence referendum there was much talk about other taxes being devolved. The UK’s exit from the EU and the announcement from Nicola Sturgeon that preparation for a second independence referendum will begin immediately means that other taxes such as corporation tax and now possibly VAT could come under Holyrood control in the medium to long term. This further increases the likelihood of tax competition and arbitrage within what is currently the UK and further challenges for UK businesses operating both north and south of the current border”.

“As with all major economic shocks, businesses that remain engaged and adaptable will be best placed to trade profitably through the changes and make the most of the opportunities that they offer. Here we look at five of the key tax implications for UK businesses.”