Brexit and corporation tax implications of Conservative party win
The Conservative party has been returned to power with a large majority. We summarise below the implications for two of the main areas of international interest.
The promise to ‘get Brexit done’ was central to the Conservatives’ election campaign, and they plan to organise a Parliamentary vote (as quickly as possible) to pass the withdrawal deal already negotiated with the EU. If passed, this would mean that the UK would officially leave the EU during 2020 (the intended date is 31 January) with a transitional period operating until 1 January 2021 - ie most operational laws and cross-border arrangements would remain in place until that date. During 2020, the new Government will aim to negotiate a post-Brexit trade deal with the EU that will take effect from 1 January 2021. However, some uncertainty will continue: in the election campaign, the Prime Minister promised not to extend the transition period beyond 1 January 2021 so, theoretically, there may be a ‘no-deal’ Brexit at that point if a trade deal has not been agreed. Alternatively, with a substantial parliamentary majority, an extension to the transition period may be possible if a post-Brexit deal takes longer to agree.
In Finance Act 2016, the corporation tax rate for 2020/21 was set at 17%. As this rate has been set in legislation, it is the rate that companies must use for their deferred tax calculations for their annual accounts. However, during the election campaign, the Conservative party pledged to set the rate for 2020/21 and the rest of the new parliament at 19%. Therefore, once this change is enacted, businesses will need to revisit their deferred tax calculations.