Tax Thursday: Potential UK exit charges on transferring business to EU

Some businesses are considering transferring part of their operations from the UK to EU companies post Brexit, but this can trigger UK exit tax charges.

Background

Following Brexit some UK based companies are looking at whether they can simplify VAT and Customs issues by transferring some or all of their business to an EU company.  However, if a UK business, or part of a UK business, is transferred to a non UK company, a UK exit tax charge normally arises.  This is  based on a deemed sale of the business at market value.  This would include triggering a UK tax charge on intangibles transferred, effectively the future profits of the UK company taken outside the UK tax net.

To do

Steps can be considered to minimise the UK exit charge, for example, making the EU company a low risk distributor with functions, risks and rewards kept in the UK as far as possible, so significant amounts of profits continue to be recognized in the UK company and minimum value is transferred out.  The position should be reviewed in detail and proper advice taken before any businesses are moved out of the UK tax net

Questions

If you have any questions, please contact Pauk Fay. Paul.Fay@crowe.co.uk