EU Referendum Affect The Self Employed

The EU Referendum – What Is It And Will It Affect UK Tax and VAT?

BrexitThe EU referendum, June 23rd of this year, will determine whether Britain stays or leaves the European Union. Almost everyone can vote in the referendum in the UK, as long as they’re aged 18+, and have registered to vote in the UK. The referendum is happening because David Cameron promised the UK he would hold one if he won the 2015 election. This was due to growing calls from members of the Conservative party, as well as members of UKIP, who argued that Britain citizens have not had a say concerning EU matters since 1975.

The EU is an economical and political partnership consisting of 28 European countries. It began after WW2 in a bid to foster economic co-operation. It effectively made Europe a single market (one giant country), allowing a freedom of movement throughout the member countries.  It has its own currency – the euro- which is used by 19 of the countries in the EU. The European Commission is effectively the civil service of the EU. It has a 28 member committee, a member from each country, and makes new laws concerning the EU. Its’ head quarters are in Brussels. The Council of the EU is also based in Brussels, and consists of members from each individual government in the EU. They usually give directions on how the EU should be working. The European Court of Justice makes sure that all of the rules imposed by The European Commission are imposed throughout Europe. It also tries to settle quarrels between European countries.

Before the referendum, David Cameron came to an agreement with European Leaders that guarenteed that, if the UK stayed within the EU, the terms of UK membership within the EU, would change. Cameron has stated that the terms would take effect immediately following a “stay” vote. The main changes to the terms are:

  • Migrant Welfare Payments – Migrant workers arriving into the UK will not be able to claim tax credits, and other welfare payments, straight away. However, they will gradually earn the right to claim the longer they stay in the UK. Cameron believes this will stop large groups coming into the country.
  • Keeping the pound – Cameron stated that Britain would never join the Euro, and that the UK currency will always be the pound.
  • Child Benefit – Migrant workers will still be able to send benefit payments to another country, which has always been the case, however, the payments will now be set at a level reflecting the cost of living in their home country, rather than the full UK rate.
  • No more EU interference – UK will not be part of a move towards an “even closer union”. As well as this, Cameron secured a red card system, which would give national parliaments the power to block unwanted legislation together.

According to recent polls, Britain is evenly split on the decision. There are definite pros and cons to both choices. There are also two definitive campaigns regarding the EU referendum and a potential Brexit (British Exit). There’s the Vote Leave group, who believe the UK should leave, and that the EU is holding the country back. They’re affiliated with Farmers for Britain and Muslims for Britain. There’s also the Britain Stronger in Europe group, who are backed by Conservative members and a handful of Labour MP’s. They’re also funded by the owner of Sainsburys. You can read more of their points on their respective websites.

The announcement of the decision will be made at 10pm on June 23rd at Manchester Town Hall.

Will The EU Referendum Affect UK Tax?

brexit

“Brexit is like a tax. It is the equivalent to roughly missing out on about one month’s income within four years but then it carries on to 2030,” the former Mexican politician, Angel Gurria, told BBC Radio 4’s Today programme. She went to say “that that tax is going to be continued to be paid by Britons over time.”
UK tax is in fact set by the UK government and is what’s known as domestic legislation, so there is reportedly going to be no change in tax law. However, for 40 years the EU has been one of the biggest influences on our tax system. Therefore, if we left the EU, an immediate change would be unclear, and we would have to wait and see if any tax legislation changed.

In the past, the European Court of Jusitce has declared that UK tax legislation is incompatible with EU law, and required such legislation to be amended. This is because of the UK’s historic tax codes conflicting with modern EU laws. After Brexit, some UK tax legislation would no longer be contrary to EU law, or under scrutiny from the cjeu. However, if the UK were to leave, yet still remain a part of the EU customs union, it would be likely that some UK tax systems would still be influenced by EU law.

With that, however, UK VAT is a mixture of European and Domestic. If there is a Brexit, UK courts will have to decide to what extent they will continue to find European Jurisprudence influencing legislation. Because VAT covers such a large proportion of the UK’s annual tax revenue (21% in 2013/14), it’s highly unlikely that the government would change the system it uses to a brand new UK legislation. However, the UK government would have more flexibility when deciding on the rate of a new sales tax. As well as this, if the UK leave the the EU,  fundamental freedoms and other EU legal principles would have little or no impact on UK tax rules, again providing greater freedom to a future UK government to legislate.

You can contact HMRC if you have any enquiries regarding tax of payments of benefits.