Brexit so far – I’m on Lucky 7

I will try to summarise the position on Brexit as I see it right now.  I’ll start by saying that some of it appears to be a game of chance leaving the future down to a turn of the roulette wheel as much as planning.

Good news

The latest agreement indicates that we have something settled between the UK and the EU27 taking us through to 31 December 2020.

That can only be described as “good news”.

In or out of the Single Market?

The next part is a little hard to grasp.

The UK is leaving the EU on 29 March 2019.  Strictly it is also leaving the Single Market and the Customs Union (as well as several other bodies) on 29 March 2019.

However, during the “transitional period”, as it is now being called, the UK will be treated as if it is in the Single Market and the Customs Union.  I have no idea whether the UK will remain in the Single Market and the Customs Union, but it has agreed to be covered by the rules of these organisations. That is an important point legally, as tax and Customs legislation as it stands relies on the UK being a member of those institutions and not just treated as a member of those institutions.  Quite a body of law will need to be amended and, of course, that will apply to all 28 current member states.

The UK will continue to obey the laws of the EU, including on the Single Market and the Customs Union, but will have no say in making or changing laws.

The UK will continue to pay contributions to the EU during the transitional period.

There is legislation to deal with transactions which covers the end of the transitional period. At present they seem simple and workable.  Let’s hope they stay like that.

No change then?

So far so good for businesses trading between the UK and the EU27.  It should mean “no change” until 31 December 2020.  So, some certainty.

Or at least that is what I thought initially.

Ireland

We have the issue of the land border in Ireland (and, indeed, Gibraltar it now seems).

The position on Ireland has not changed since 8 December 2017, despite the statements coming from various UK ministers.  The UK and the EU27, principally Ireland, are to try to work out a practical solution.  This means thinking up something new, which relies on technology, and which can be put in place working efficiently by 31 December 2021. And which is agreed upon by all the parties. With the greatest of respect to the Irish from both sides of the border, that would be a tall order in any event and will be all the more difficult to achieve in Ireland.

The UK Government has made some suggestions, but little work seems to have been made otherwise, even to work up the suggestions.

The fall-back position is that Northern Ireland will remain in both the Single Market and the Customs Union.  Whilst that is in black and white in the agreement, there is little doubt it would be unacceptable for Unionist politicians in Northern Ireland, as well as many in the UK Government and official opposition.

Unhappy hard Brexit supporters

Perhaps a more difficult issue with the transitional period is that it could be ended by the EU27 at any stage if the UK does not comply with the rules.

The fact that has been made clear in the agreement is hardly a surprise – even after the Belfast agreement on 8 December 2017, the UK’s head negotiator Mr Davis said the UK would walk away from that agreement if it suited the UK.

And we know that even staying within a mechanism linked to the Single Market and the Customs Union where the UK has no say during the transitional period is an anathema to hard Brexit supporters.

In the meantime, there is strong opposition to the agreement from hard Brexit supporters in respect of, but not restricted to, fishing rights.

Some hard Brexit supporters have expressed their opinion that the agreement sells them down the river – quite how that will manifest itself over the coming weeks is hard to tell.

Given the UK’s track record since the referendum, there is therefore a risk that the UK could create an early end to the transitional agreement.  There lies the uncertainty for businesses trading between the UK and the EU27 during the transitional period.

Clarity on tax rules in the UK and in the EU27?

In the meantime, I look forward to HMRC (the UK tax department) providing clarity on which legislation and which administrative arrangements will remain in place after 29 March 2019.  This is important.

Equally important is what the environment will be for UK businesses trading in other member states.  Will it remain the same?  It should, but we don’t know for sure.

What do we think of it so far?

So, how I see it is that some good progress has been made, but there is a long way to go before we know what is happening from 29 March 2019 until 31 December 2020.

In the meantime, what will happen from 1 January 2021 remains shrouded in mystery.

We know the UK aspiration is for the UK to have a parallel administrative, taxation and regulatory environment to that of the EU27, in the hope that whilst being outside of the Single Market, the Customs Union and the EEA, as well as various EU bodies, trade between the EU27 and the UK will continue as it does now.  If that can be achieved, it will be an incredible achievement by all concerned.

But we already know that both in the UK and the EU27 that is probably a step too far for most.  For example, issues related to the European Space Agency contracts have had the UK crying “foul”, whereas it seems clear that the UK chose to leave the EU and as such it should have expected that it would lose access to that market.

So, fingers crossed – our “plan for the worst and hope for the best” strategy remains intact.  In the meantime, my money is on lucky 7.

Steve Botham