Big changes and bigger opportunities
Last week the UK made a historic vote to exit from the European Union, a decision that has led to a significant level of unrest around the world. As a key player in the world economy, the UK’s “Brexit” has catalyzed concern among many as to how this decision will affect businesses, trade and global markets, both domestic and internationally. The reality however, is that the decision will not see major changes immediately. British leaders could take months to decide on a policy for exit, after which they must notify the EU of their decision to leave — a process which could spark years of negotiations as to the exact terms of the exit.
While the long term affects of Brexit remain unknown, there are some implications that are expected to arise. Aside from the apparent fluctuations in the stock markets, there will undoubtedly be concerns about other countries following Britain’s lead and leaving the EU. Mostly political in nature, this concern could cause further economic instability; however, central banks have shown a willingness to do what they can in terms of mitigating financial impacts and lessening the burden wherever possible. It is also widely speculated that the UK and the EU will work to enter separate trade agreements in order to lessen the impact.
Looking forward, there are a number of potential tax positives that may accompany Brexit. Due to EU restrictions on the level of tax relief schemes, such as Research and Development and Patent Box tax relief, the UK may now have the freedom to change and re-design tax relief schemes for its small to medium sized enterprises (SMEs). The UK’s value added tax (VAT) is another area of possible change. Due to standard rates set forth by the EU, the UK’s current VAT has to be a minimum of 15% and with up to two lower rates with a minimum of 5%. No longer under this restriction, the UK could set new rates as it sees fit or potentially abolish VAT altogether.
The UK’s 48.1% to 51.9% vote to leave the EU will certainly cause volatility among SMEs. On the bright side, the affects of Brexit will not happen immediately. It will be a gradual process with many changes to legislation and regulations in the coming years. With that said, it is important to note that major changes bring opportunities for business. SMEs across the UK and the world should stay adaptable and remember that the UK is a strong business environment that is unlikely to change in the long term. British leaders will address these changes over time, and will focus on creating stability and a stronger infrastructure for its businesses.