Brexit’s impact on taxation
With the UK's withdrawal from the EU on 31 January 2020, a transition period will begin in February for leaving the EU; the transition goes on for the remainder of 2020.
This means that the current rules will continue to be in place up to the end of 2020 as if the UK were still a member of the EU. The European Union and the United Kingdom will have talks during 2020 on the issue of future relations. Due to the negotiation schedule, some sectors may fall outside the scope of the agreement starting on 1 January 2021. Businesses in particular should be prepared for this possibility.
For more information on the withdrawal agreement, the transition, and on the new agreement to be negotiated, see the website of the Finnish Prime Minister’s Office.
Withdrawal agreement and transition period
The agreement on the UK’s withdrawal enters into force 1 February 2020. The agreement will dismantle all cooperation based on the former membership of the United Kingdom in the EU in an orderly manner. However, the agreement on withdrawal does not contain provisions on the future relations with the EU.
The withdrawal agreement provides for a transition period until the end of 2020, during which the relationship between the EU and the UK will continue under the EU’s current rules, as if the UK were still a member state. The only significant exception is that the UK no longer participates in EU decision-making or in the activities of EU bodies.
Impact on citizens
The provisions of the withdrawal agreement safeguard the residence, employment and social security rights of EU citizens living in the UK, and UK citizens who live in the EU, under EU law for life if they have settled in the UK or the EU before 1 January 2021. Their status and rights remain as they are, under the key EU legislation, as of 31 December 2020. People who move between the UK and EU countries after 31 December 2020 are no longer subject to the EU freedom of free movement of citizens, and restrictions will be placed on their entry and rights.
Brexit has no direct impact on individual taxpayers’ income tax. As for the free movement of goods, the transition period will ensure that free movement between the UK and EU will continue in 2020.
Impact on businesses
The UK turns into a non-EU country, but the free movement of goods between the UK and EU will continue throughout the transition period. During the transition period, the current EU rules and guidelines relating to value-added tax in the internal market and excise duties are applied.
The UK withdrawal from the EU has no direct impact on corporate taxpayers’ income taxes.
Further information about the withdrawal agreement (Finnish Prime Minister’s Office)
Outlook on future relations between the EU and the UK
The European Union and the United Kingdom will have talks during 2020 on the issue of the future relations. Further talks will be held on future arrangements for cooperation. The aim is for the future agreement on mutual relations to enter into force when the transition period is over in January 2021. More information will be released later as the negotiations proceed.
The UK’s exit from the EU will bring changes to cross-border trade, including the VAT rules and the levying of excise duties when the transition is over. Study the procedures and rules that apply on commercial operations with non-EU countries:
Further information on the European Commission’s website:
- The Commission has issued a number of legislative proposals, communications and notifications in preparation for the UK’s withdrawal from the EU.
- Brexit negotiations
- Market Access Database: Information on trading with third countries
- Negotiating documents
- Brexit negotiations and Brexit preparedness
- Brexit preparedness notices
Information on The European Council’s website
Information on other authorities’ websites
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