The Government has been asked to clarify the future of the UK’s VAT regime in the wake of the EU referendum.
Earlier this week, Labour published a set of 170 questions which they believe that ministers need to answer as they prepare to enter formal negotiations to leave the 28-nation bloc.
Several of these relate to tax policy, including the pressing matter of what will happen to Britain’s VAT system.
Prime Minister Theresa May has been asked to clarify whether the UK rules will continue to be broadly governed by the EU VAT Directives.
These currently dictate the number of VAT rates a country can set and the scope and incidence of the tax.
There has been speculation about whether Britain would take the opportunity to reform the current system, replacing it with a new “bespoke” model.
The extent to which changes could be made will depend, to some extent, on the nature of the relationship that the UK has with the EU following its departure.
Some believe that the Government will take advantage of the greater freedom; for instance the country will no longer have to follow the Court of Justice of the European Union (CJEU) interpretation of VAT law.
That said, some commentators expect that there are only likely to be minor amendments in the short term, taking account of the fact that the status of transactions between the UK and the remaining member states is likely to change in the years ahead.
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