This article was first published in the April 2018 UK edition of Accounting and Business magazine.

ACCA is pressing for clarification on some key outstanding issues regarding Britain’s departure from the EU as the European Commission consults on a draft withdrawal agreement released on 28 February 2018.

Of key interest to Chas Roy-Chowdhury, ACCA’s head of taxation, is the length of time that the European Court of Justice (ECJ) will retain jurisdiction over elements of British tax law following the UK’s planned departure date of 29 March 2019.

Under the proposed withdrawal deal, the departure would kick off a short transition period, to 31 December 2020, during which time EU laws would continue to apply. But for some tax issues, the influence of European law could live on for years beyond that.

Under article 95 of the draft deal, on indirect tax administrative cooperation, the EC proposes that the EU regulation on how VAT information is stored and exchanged between member states should apply in the UK for five years after the transition period – so up to 2025.

The same would apply to EU rules within directive 2010/24/EU on how member states help each other collect unpaid taxes and duties relating to any transactions that took place before the start of 2021. Here too, EU law would live on until 2025.

The problem, notes Roy-Chowdhury, is that there have been calls, including from within the UK, for the transition period to be extended to 2022, so large is the amount of administrative work required in unravelling Britain’s 45-year membership of the EU and its earlier incarnations. If this were to happen, EU jurisdiction over these and other elements of British tax policy could extend to 2027. ‘It’s to be expected, when you have a really long-term relationship, there are going to be some ongoing links until it is completely severed,’ says Roy-Chowdhury.

UK and European accountants need clarity over these arrangements so they can plan. As well as the timetabling, ACCA would like details on what institution will resolve disputes between the remaining member states and the UK over these tax issues after the Brexit deadline has passed. Will it be the ECJ or some kind of special UK-EU tribunal? ‘We need to know about that. The sooner, the better,’ says Roy-Chowdhury.

Such institutions may have a long life. Under the proposals, EU rules would continue to apply to pensions, taxes, social security and other benefits paid to past and current members of the European parliament and their dependants, and also to EU staff members living in the UK. This legislation would continue to apply in perpetuity, given it is applicable to work undertaken ‘after the end of the transition period in connection with activities of the EU pursuant to this agreement’.

Mutual recognition

There is also the issue of mutual recognition of qualifications. Under the draft agreement, EU legislation on this subject would continue to apply for all professional accountants who have secured recognition of their qualifications, whether UK citizens working in the rest of the EU or EU accountants in the UK. 

Even those accountants applying for mutual recognition of their qualifications before 31 December 2020 could see these benefits apply for the rest of their careers. And it appears that there has been talk in Brussels that the EU would like to see such recognition systems continue for accountants qualifying after Brexit, maybe writing this into a withdrawal agreement. 

Keith Nuthall, journalist