Brexit Finally Happened – What Next?
After a tumultuous journey, Brexit was achieved due to the passage of an EU–U.K. trade agreement, effective January 1, 2021.
U.S. and U.K. trade negotiations required a finalized EU deal, which now leaves the completion of a trade agreement to the Biden administration.
Make sure you know how these trade policies could affect your organization.
It took nearly five years, but the long, drawn-out saga of Brexit finally concluded January 1, 2021, when the United Kingdom (U.K.) fully exited the European Union (EU). While this exit formally occurred in January 2020, the remainder of the year was a transition period during which the U.K. continued to operate under EU rules while negotiating the terms of Brexit — chief among them, a trade agreement.
Trade between the U.K. and EU
As an EU member, the U.K. had not been subject to tariffs or taxes on the import or export of goods and services with other EU members. With this agreement upended by Brexit, a new trade deal needed to be established. On December 24, 2020, the EU and U.K. finally created the Trade and Cooperation Agreement, which the U.K. Parliament approved on December 30, 2020.
Trade between the U.K. and the U.S.
Under the Trump administration, the U.S. and the U.K. had substantial negotiations regarding a potential trade agreement. However, since many key points could not be negotiated without a completed trade agreement between the EU and the U.K., it is now left to the Biden administration to finalize such an agreement.
In this fog of uncertainty, U.S. taxpayers with operations and affiliates in the U.K. should monitor potential changes to U.K. income tax treaties and value-added tax (VAT) policies as the U.K. continues to establish its policies without the EU. U.S. businesses operating in the U.K. should evaluate what impact Brexit may have on them and explore changes that may be needed to continue operating efficiently and economically.
For additional key insights and considerations, read this recent article, Brexit and beyond: the ten tax actions businesses need to consider, from the Brexit team at Smith & Williamson, a member firm of our global network, Nexia International.
How we can help
CLA can help evaluate the impact of Brexit on your global operating structure and assist with recommended actions to successfully navigate any changes.
A Brexit tax health check can assess how Brexit could impact your tax affairs and provide practical tailored guidance regarding any necessary changes. Through our affiliation with Nexia member firms, CLA’s global team can connect you with additional Brexit resources in the U.K.
By Jill Boland and David Springsteen
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