The Impact of Brexit: Ayming UK Expert Opinions
Hear what the impacts of Brexit might be for R&D tax credits, European grants, VAT and procurement & supply chain.
Procurement: Alejandro Alvarez, Director - Operations Performance
“Brexit will have a fundamental impact on businesses’ supply chains. It’s highly likely that costs will rise, which could have a lasting impact on the UK’s competitiveness.”
“The health, agriculture and manufacturing industries have long benefitted from their ability to attract a workforce from EU member states, and a vote to leave the EU will introduce both cost and operational challenges, as businesses look to bring in affordable labour from elsewhere.”
“Industry experts have also suggested more than 35% of UK imports could be subject to higher trade tariffs in the event of an exit. This could mean costs to produce goods and services will go up and Britain will be less competitive as a trading partner. Clearly other trade agreements will be negotiated but this will take time and money and there is no certainty on what the agreements will look like when the dust settles.”
“Even now, businesses need to be thinking about how they can collaborate more closely with their suppliers, ensure their operations are as agile as possible, as well as identifying risks early.”
R&D: Justin Arnesen, Director: R&D Tax & Grants
“The UK’s decision to leave the EU will mean that HMRC is no longer bound by EU regulations – a result of parts of the R&D scheme currently being considered as state aid.”
“HMRC would then have complete control over its approach to the various R&D schemes. As the UK is less generous than schemes elsewhere in Europe, Brexit may provide the incentive HMRC needs to improve its offering so the UK doesn’t lag further behind."
"That will be especially important if the UK wants to remain an attractive place to do business.”
European Grants: Dr Caroline Elston-Giroud, European R&D Grants Manager UK
“Whilst nothing will change immediately for UK organisations obtaining EU funding. The vote to leave will almost certainly lead to the UK being kicked out of Horizon 2020 (the EU Grants scheme) at the point when we leave the EU. This suspension will leave businesses and universities with a funding gap worth billions of pounds. There is a precedent for this: Switzerland was expelled from accessing Horizon 2020 funding when it voted to introduce quotas and permits for migrants within the EU. To this day, they only have partial access to H2020 funding and have not recovered all of the benefits or ground lost in 2014.
“The UK has been particularly successful in winning grants through Horizon 2020, so if that is no longer available, the Government will need to step in and do more to fund innovation by other means such as Innovate UK or tax credit schemes, or risk facing a brain - or even investment - drain to other countries.”
"However, in the meantime, organisations should be reassured that it will be 'business as usual' in the short to medium term when applying for Horizon 2020 innovation funding."
VAT: Gavin Barker, Head of VAT
“This vote to leave the EU will mean that HMRC won’t be bound by the Principle VAT Directive or any CJEU decisions once the exit has happened. However, given the complex nature of VAT and the time and effort it would take to implement any new legislation, it would make sense to replicate the existing EU legislation here in the UK.
For the short term at least, Brexit shouldn’t have a material impact for UK businesses within the UK. Of course further down the line, it would give the UK the flexibility to set its own VAT rates and decide which goods and services the rates apply to. That will have a significant impact on businesses in the UK and businesses accessing the UK market.
From a cross boarder refunds perspective, 8th Directive VAT reclaims will no longer exist and all claims in Europe would be classed as 13th Directive claims, leaving UK businesses with significantly more paperwork due to the way these claims are currently processed.
There will be other many other changes to the way UK VAT interacts with the rest of the EU. We will keep clients updated as these are analysed in more detail.”