Brexit – concerned and bemused of Coventry

Recently we have seen a stronger than ever hint that there may be a two year (possibly three) transitional period from March 2019. Sadly, there was little flesh behind this, but the inclination is to believe that the UK will continue to benefit from regimes similar to the Single Market and the Customs Union.

I’ve mentioned transitional phases before, and the most famous one is in respect of completing the Single Market – in brief it was never completed and the five-year transitional phase became the current position. You might say it is a nice ploy to get politicians out of difficulty, not quite as effective as dropping something of the back burner, or kicking it into the long grass, but still effective.
But I am still left bemused and concerned.

My bemusement is simple – I do not understand international diplomacy, and certainly not the diplomacy between the UK and the EU. Access to the Single Market and the Customs Union is one such aspect. During the exchange of entrenched opinions in the weeks preceding 23 June 2016 (the date of the “in/out” referendum in the UK) various comments were bandied about regarding the divorce settlement that the UK would have to pay to leave the EU. Those convinced about leaving were adamant that it would be €nothing, whereas the remainers often quoted €50,000,000,000. From my position as a UK citizen (well, an EU citizen as well), it seemed to me that the UK had entered into an agreement meaning that it would have to pay a divorce settlement. I had no idea how much it would be, but must admit to accepting the €50,000,000,000 number seemed to have more credence than €nothing.

Roll forward 13 months, and now that debate amongst the protagonists has changed, as indeed have the protagonists. The UK Foreign Secretary says that the EU can whistle for the divorce settlement, and the French finance minister now wants €100,000,000,000. Clearly, we now face a cantankerous divorce, and in the real world we all know how awful that the type of divorce tends to be, and that it gets dragged out for far too long, with the lawyers being the only people making any real money out of it. And I’d say that is where we are with the two to three-year transitional period now becoming more tangible daily.

But, joining clubs like the Single Market and the Customs Union means payment of an entry fee. So, is the current position that the UK needs to pay a divorce settlement, but then pays again to maintain access to the Single Market and the Customs Union. It seems to me like having to pay twice. And that is why I think that the divorce settlement cannot be made before trade talks begin. The two are inseparable. It is not right to have to pay to leave a club and then pay again to come back in, certainly when membership has benefits to both sides.
And that is also why I am concerned, or at least partly so. If the divorce is cantankerous it may become increasingly cantankerous on trade between the UK and the EU, may well drive more and more businesses away from the UK, and leave all EU (i.e. including the UK) businesses in the dark until too late in the day.

As for the UK VAT perspective, we also have the prospect of the Brexit impact to contend with by the end of March 2019, whilst at the same time businesses are being expected to complete the preparation for “Making Tax Digital”, which really ought to be called real time tax reporting, something that cannot be completed until we know the changes required from the Brexit impact. In the meantime, other changes intended for the same date are to be completed – those involving fulfilment houses, where massive VAT rule changes will be seen (to prevent avoidance), but where many in the sector are also heavily involved with the Brexit impact. In this aspect of Brexit, the only winners will be tax consultants, accountants, lawyers, software houses and IT consultants.

Forgive the analogy, but right now it does feel like UK businesses are to be sent over the top in the front line, by a leader standing safely behind the lines, with no instructions except to keep marching straight on. Perhaps that is why so many are deserting the UK already.

It is time for tangible information to be given to businesses trading between the UK and the EU so that they can start to plan their business strategy. Instead we remain reliant on soundbites and leaks. This is just not good enough.

So here I sit, in the city of Lady Godiva, who rode naked through our streets to protest at her husband’s taxation of the citizens of the city, protected only by her chastity. Here I sit bemused and concerned protected solely by my PC. And whilst all readers would beg that I don’t get on Godiva’s white horse, I think it is time for someone to drag the UK Government and the EU into the real world. I was going to say, “and to open their eyes”, but we all know what happened to Peeping Tom.

Steve Botham

Brexit – where are we now?

The honest answer would seem to be that nobody has got a clear idea.  Many are espousing opinions, but it seems that even those negotiating on behalf of the United Kingdom do not know what they aim to achieve, or at least have no intention of telling UK businesses and citizens what they are up to. The argument that in doing so it would damage the UK’s negotiating position is unsustainable given the outrageous statements which continue to be issues by those in charge of the process for the UK.  Their position seems to be based on the rest of the European Union rolling over and asking the UK to tickle their tummies, which means that nobody needs to know the UK’s position.  Even heavyweight boxers generally show more respect to their opponents.

Matters are not helped by the UK having a minority Government backed by a sectarian party from Northern Ireland. In reality, if the Government believes it is likely to be defeated in Parliament it either fails to put things before Parliament (and right now that includes anything to do with Brexit) or else seeks a last-minute compromise (otherwise called a backdown) in order to avoid a defeat. In the meantime, the main opposition party seems to have no clear policy, seemingly waiting for the Government and its allies to tear themselves to bits, leaving it to sift through the pieces. It is no wonder that rumours of an Autumn General Election persist.

Some clarity, at least, has emerged from the Confederation of British Industry (“the CBI”), a very powerful lobby group, which has set out its case that the UK needs to remain within both the Single Market and the Customs Union.

Right now, the official lines from both the UK Government and the Official Opposition are that Brexit means leaving both the Single Market and the Customs Union, but adopting new measures which won’t be called the “Single Market” or the “Customs Union”, but have the same benefits for all concerned.  There is also talk as to the UK accepting freedom of movement and the supremacy of the European Court of Justice to remain in both the Single Market and the Customs Union. There also appears to be an appetite for a transitional period, at long last, which may avoid the potential cliff edge looming on 31 March 2019.  At the risk of seeming very stupid, I cannot see why the UK would leave the Single Market and the Customs Union to then have something else which is the same, but upon which the UK has no direct political influence and, indeed, the UK has to pay to join.

In the meantime, a phoney war continues with the UK implementing decisions of the European Court of Justice whilst continuing to demand that it should not be the final court for the UK – and here I do see some confusion as my understanding is that the European Court of Justice makes decisions on questions which are then returned to the national court for implementation – in other words, the UK’s national court already sits at the top of the legal tree.

You can fully understand why the CBI has made its call. Business needs certainty, and right now anybody involved in trade with the UK has no such certainty. Indeed, some businesses are making decisions concerning, for example, investment over the coming ten years, some decisions being made today being implemented over the next couple of years. So, what would a business do with, say, €10,000,000 investment on the horizon?  I would suggest that we have some indications already as to what the commercially sensible action is, and it is not to invest in the UK which is a travesty for the UK economy.
So, whilst my world of VAT and Duty will be filled with interest over the coming two to five years, my clients do not wish to have any such fun and games.

Accordingly, I think it is essential for the UK Government and the European Commission to publish their negotiating positions on Brexit.  And I believe those policies should not only be published soon, but also receive the ratification of the relevant Parliaments. Only that way will business see what is on the table and thus be provided with some information upon which to base decisions.  31 March 2019 is not far away!

Steve Botham