Brexit, what happens if Parliament passes the new deal?
It was hard to miss the news last month of a new deal agreed between the UK and EU. This article explores the legal ramifications of adopting this deal as law. Before delving into the conundrum itself, it is probably best to give a background on the terminology frequently used when discussing Brexit. Specifically, there are three legal documents whose legal status will have an enormous impact on post-Brexit UK Law. The first is the European Union (Withdrawal) Act 2018 (EUWA). This Act of Parliament received royal assent in June 2018 and is currently the governing law on the UK's position post-Brexit. Second, is the new Withdrawal Agreement (New WA). This is the agreement reached on 17th October 2019 by Prime Minister Johnson and the EU. Finally, there is the European Union (Withdrawal Agreement) Bill, more commonly referred to as The Withdrawal Agreement Bill (WAB). This Bill was first presented to Parliament on 19th October 2019 (Super Saturday). The New WA itself does not become binding until it is ratified. Pursuant to the EUWA, the UK cant do this without the House of Commons passing a motion known as a meaningful vote. The EU process of ratification is discussed in our article The Withdrawal Agreement Is It Legal?. Importantly, the New WA is not legally binding under domestic law and must, therefore, be given effect through an Act of Parliament, hence the introduction of the WAB into the House of Commons. On Super Saturday, MPs opted to withhold approval of the New WA through a meaningful vote until the means for transposing it into domestic law had been agreed. What this means practically is the New WA cannot become binding unless the WAB is first passed. If passed, the WAB will also amend the EUWA. The passing of the WAB would amend existing provisions in the EUWA and introduce a buffer period known interchangeably as the transition period or implementation period. This is the period between exit day and 31st December 2020. The latter date is frequently referred to as IP completion day. It is envisioned that during this period, a more permanent agreement with the EU will be reached and passed. This transition period may be extended once for up to 1 or 2 years but only if it is agreed by 1st July 2020. Unlike the current situation, once the UK has left the EU, the ability to bilaterally agree on an extension beyond and/or after this deadline will not be an option.
The Transition Period
Under the EUWA, EU law after exit day only has effect in so far as it has been transposed into UK Law. In contrast, the WAB introduces two provisions which effectively delay this. Under these two sections, both EU Law which applies directly or has direct effect, as well as EU, derived law continue to apply as if the UK was still a member of the EU. Similarly, rules regarding the relationship with the CJEU are postponed to the end of the transition period. It, therefore, appears that the elements of EU law excluded by EUWA will continue to have effect in the UK until at least 31st December 2020. The introduction of a transition period has broadened more than just the types of laws which will apply in the short-term. It has also expanded the potential scope of the laws to be retained. This is because any new law (for example a European Commission Decision) made after exit day will still apply to the UK, as long as it is made or passed before the IP completion day.
The Law After the Transition Period
Save for changing the date to which the rules applies to, the original provisions in the EUWA remain largely unchanged. This said a new section has been introduced which appears to reduce the scope of the exceptions to the retained law by recognising rights and remedies created or arising under the New WA. The explanatory notes published with the WAB provides an insight into what specific rights and remedies are likely to be covered by this, namely:
The ability to rely directly on the New WA to bring claims before UK courts;
The supremacy of the New WA over any inconsistent domestic laws;
The use of the EU method of interpretation and principles when examining references contained in New WA to EU law and its concepts.
The introduction of another new provision confirms that the when determining the validity, meaning or effect of the New WA, and by default, the rights and remedies created therein, EU rules of interpretation and EU general principles apply. This niche group of laws, therefore, grant those relying on or interpreting it much broader scope than the general retained laws. In contrast, all other retained laws will be subject to the much stricter UK rules of interpretation. In practical terms what this means for litigation is, if a party wishes to challenge the application of domestic law and can establish a relevant right which has been breached, the scope for arguing that the domestic law has been misapplied will be significantly wider. It also offers the opportunity to have the relevant law declared inconsistent, thereby preventing its application to the matter at hand.
As is evident from the variety of possible avenues the UK may still follow, much is still yet to be decided and agreed. With the pending election in December, it is also largely impossible to predict which route we shall be driven towards. The New WA does not, therefore, bring the clarity and conclusion some may hope it would achieve.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.
Offshore Structures and Onward Gifts
The so-called “onward gift” tax anti-avoidance rules were introduced by the Finance Act 2018 to complement the changes brought in the previous year aimed at restricting the UK tax privileges afforded to non-UK domiciled individuals. The rules were designed to close some perceived loopholes in relation to the taxation of non-UK resident structures (including but not limited to non-UK trusts). With effect from 6 April 2018, it would no longer be possible for an individual to receive a gift without questioning its providence, particularly where family trusts are involved.
The rules were designed to prevent non-UK structures from using non-chargeable beneficiaries as conduits through which to pass payments in order to avoid tax charges. Gone are the days of “washing out” any trust gains that could be matched to offshore income or gains by prefacing a payment to a UK-resident taxable beneficiary with a non-taxable primary payment to a non-UK resident beneficiary.
“It is notoriously challenging to prove a negative (especially to HMRC) and even more tricky where the taxpayer must speak to someone’s intention other than their own.”
Note that the new rules will apply where funds are received from non-UK resident structures before 6 April 2018 to the extent that they are subsequently gifted after that date.
Increased Investment in Personal Tax Compliance in the UK
Changes in public opinion, advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. In addition, the Russian invasion of Ukraine and the corresponding economic fallout have prompted governments to increase transparency in relation to investments by wealthy foreign individuals in their countries.
The UK’s HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work.
It should therefore be well placed to take advantage of new international efforts to increase tax compliance, particularly against the backdrop of the already extensive network of bilateral tax treaties in the UK, and not forgetting that the UK was a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
Case note: Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC)
As HMRC continue to apply the Kittel principle to increasing numbers of industries and businesses, taxpayers need to be vigilant about evidential requirements that HMRC must fulfil in order to discharge their burden of proof. Read JHA’s latest insight into the First-tier Tribunal’s decision in Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC).
If you require any further information about the Kittel, Mecsek, and Ablessio principles, or any other allegations by HMRC of fraud or fraudulent abuse, please contact Iain MacWhannell (email@example.com).