Serial Tax Avoidance
The CIOT responded to a call for evidence issued by the Economy, Jobs and Fair Work Committee of the Scottish Parliament. The Committee issued the call for evidence to support their inquiry into the Economic Impact of Leaving the European Union (EU).
The CIOT‚ s response focused on tax implications for Scotland‚ s exporters, non-UK companies investing in Scotland and on potential labour market issues. Due to space constraints, we merely highlighted key issues. The response took as its baseline the position if no agreement is reached between the UK and the EU under Article 50 of the Treaty on European Union (TEU).
In relation to exporters and those investing in Scotland, we set the scene by considering the likely implications in the areas of VAT, excise duties and customs duties.
We looked at a number of potential issues for Scotland‚ s exporters, while pointing out that these might also affect non-UK companies investing in Scotland. For example, once the UK leaves the EU, it would also leave the EU customs union. As a result, goods going from the UK into the EU would be classed as exports (rather than dispatches) and subject to EU customs duties and import VAT.
While there may be a reduction in some areas of compliance (no need to complete EU intrastat returns or EC sales lists), in other areas Scottish exporters are likely to face increased compliance burdens, for example with export declarations and procedures needed for trade with EU member states.
The UK will no longer be able to offer the mini one-stop shop (MOSS), which currently applies to UK businesses selling digital services to non-business customers in the EU unless they are already registered for VAT there. So, Scottish businesses will have to either register for MOSS in an EU state or register and account for VAT in every EU state to which they sell digital services.
In relation to labour market issues, among other points, we noted that currently cross-border workers within the EU and their employers benefit from the Regulation on the coordination of social security systems, which prevents double contributions being paid. This will no longer apply to UK nationals working in the EU and EU nationals working in the UK. The UK only has a limited number of bilateral social security treaties which are uneven in their scope and effect, so withdrawal from the EU will increase the exposure to double contributions of UK workers who spend time working in the EU and/or to a less favourable effective benefit record being built up in the case of mobile workers.