Post-Brexit Britain

The UK’s departure from the European Union will have significant short-, medium- and long-term impacts. Here, we share our thoughts on how Brexit will impact the charities, businesses and private individuals Buzzacott supports.

Katharine Patel is a Partner of the firm and head of the Charity & Not-for-Profit team. 

The charity sector is very used to dealing with change. Monitoring government regulations and sourcing new funding opportunities are all in a day’s work. The sector is so diverse that, for some, Brexit presents a challenge; for others, it presents an opportunity.

Only a relatively small proportion of charities receive funds managed by the European Commission (for example, the European Regional Development Fund and the European Social Fund), and those that solely depend on these funds are even fewer in number. These grants tend to represent just one income stream among a whole host of other sources. 

Rather, it’s the state of the wider economic sphere that our clients are watching most closely. If the Brexit process continues to bring fluctuations in the value of the pound, it may deter foreign investors and weaken the UK economy. Where our clients rely on income from listed investment portfolios or property, an unstable financial environment could reduce returns and capital growth.

It’s less certain how this could affect the availability of donations from private sources. It is often envisaged that overall charitable giving will fall in line with the state of the economy. However, there is an argument that the rate of charitable giving is relatively inelastic at times of uncertainty. Either way, this brings into focus the increasing need for charities to engage with the general public and the communities they serve, in order to demonstrate the positive impact they generate.

Buzzacott is also monitoring opportunities to reduce the tax burden on charities.

At the moment, charities can access a number of important reliefs such as business rates and Corporation Tax, but high levels of irrecoverable VAT are one of the biggest tax burdens that many charities shoulder. Although no major changes are envisaged, Brexit does provide the UK government with an opportunity to take a fresh look at granting a more favourable VAT position to charities and not-for-profits. These institutions may then find they’re able to recoup a greater proportion of their outgoings.

A number of our clients operate in some way in the EU although most have a UK national, regional or local focus, of their activities take place in the developing world.

A specific challenge for some will be the potential restriction that Brexit will place on the movement of labour across orders. For example, healthcare charities often recruit their employees from within the EU and certain educational bodies rely on EU students to boost their income sources. If Brexit introduces restrictions on workers from the continent, it may threaten charities’ abilities to access necessary skills.

But leaving the EU also means we level the playing field when it comes to talent. If organisations can source talent from all over the world, we may start to see more Australian, American and Asian citizens filling vacant positions here in the UK.

Ultimately, charities and not-for-profits are adaptable. Brexit might just offer a greater opportunity for the sector to demonstrate its value to the UK and to thrive.

Peter Chapman is a financial services audit Partner and heads up the Corporate Audit and Assurance team.

Businesses can be reluctant to move forward while there is little clarity about the UK’s future outside the EU. But if they wish to stay relevant and competitive within their respective industries, they must continue functioning as usual. Better yet, they should take advantage of this period of change to create new opportunities.

Access to the single market is getting a lot of press attention at the moment. Given that 50% of our corporate clients are active in the financial services sector, the future of EU passporting rights is a key business consideration for us and the financial services sector clients.

We expect, when it comes to exit, that Britain will enter into a system of equivalence, whereby we’ll choose to recognise EU standards governing financial trading in an effort to retain mutual access to other markets.

If Britain withdraws from the European Economic Area (EEA), international financial firms may be forced to choose another point of entry to the single market. It will likely make a difference to London’s role as a financial centre, and accelerate the rise of other European centres like Frankfurt, Paris and Dublin. But that’s not necessarily a reason to be concerned. For those that are looking to open representative offices in locations such as Luxembourg, Dublin and Malta, we’ve been helping them sound out their options. But no one is making the move just yet.

In the non-financial services market in particular, a number of business owners have reported that the decision to leave the EU has positively affected them. Two clients – both entrepreneurs – have recently sold their businesses to US firms which, with the depreciation of the pound, saw Brexit as an opportunity to break into the UK market for a cheaper rate than they would have been able to just a couple of years ago.

London remains a very attractive location. The UK already has a favourable rate of Corporation Tax – which is set to fall to 17% – and for international corporates looking to expand or relocate to the UK, this remains a fundamental consideration. It’s unlikely we’ll see considerable change to VAT, and it’s doubtful Brexit will bring any change to audit and reporting requirements – no one has an appetite for deregulation.

So, our clients can proceed with caution.

There are still plenty of positive investments taking place in the UK. We gained a new client early this year: an Australian company that has set up an office in London as its gateway to Europe. And McDonald’s recently made the decision to move its international tax base from Luxembourg to Britain. Moves like these are helping to secure growth, increase the number of jobs, and stabilise the UK economy.

Justin Dillingham is a Partner in the Expatriate Tax Services team.

Many of the clients we support in the Expat Tax team are US citizens working in London’s finance industry. For these individuals, their greatest worry is how the future of Brexit might affect their employment with international banks and financial institutions. There’s a possibility our clients will find themselves having to relocate to ‘preferred’ financial centres.

That was the case for one EU national client and his family, who made a quick decision following the Brexit vote. When we met last summer, he explained, “well, you know we’re looking at schools in Frankfurt now. We’ll be gone by the end of the year.” But 12 months on, they’ve decided to stick around.

That’s not uncommon. From our discussions with clients, we’ve discovered that while they have a deal of individual mobility, they’re reluctant to uproot their families. It’s especially true of those who have been living in the UK for a long time, and who have embedded themselves in British culture. 

While most of our clients are quite prepared to commute to the likes of Dublin or Paris, they’re only looking to do so three or four days a week, and maintain their base in the UK. Expats are finding these other European hubs just don’t have the same domestic infrastructure they’re used to as far as housing, schooling and international travel opportunities are concerned.

If our clients find themselves working in the Eurozone, it means their income will be taxable in these countries. But just as we’ve always offered our clients an integrated approach to their UK and US tax returns, we’ll leverage our membership of PrimeGlobal* to support their multiple tax requirements.

For now, we don’t foresee huge change in the way expats will be taxed. It’s important to remember we’ve already seen a lot of change, since 2008, long before the idea of Brexit was first floated.

Then, the talk was of Geneva. People thought there would be a huge exodus of hedge funds and international corporations – but only one client upped sticks. Britain is no longer as good a tax environment for non-domiciled residents as it once was, but it is still favourable enough for people to want to live here.

So no one is pressing the panic button yet. 

A quote from Charles Darwin comes to mind, one that’s pretty apt: “It is not the strongest of the species that survives, nor the most intelligent, but the ones most adaptable to change.”

Our clients will adapt, and we will too. We’ll continue to be at the centre of our clients’ needs.

* Buzzacott is a member of PrimeGlobal – an association of 350 independent accounting firms and business advisors with a presence in 90 countries. As part of the association, we help our clients achieve their goals in international markets – no matter what the future holds for post-Brexit Britain.

This article first appeared in the fifth issue of our firm-wide magazine, Beyond the Numbers. To download the full magazine, just click here

Our specialist teams collaborate to provide the highest calibre of advice. We’re big enough to have deep knowledge in a broad range of niche fields – and small enough to offer a personal approach. We’ve enjoyed consistent growth over the last century, and building lasting partnerships has been vital to our success. If you have any questions about this topic or would like tailored advice, please contact: enquiries@buzzacott.co.uk.

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