‘History doesn’t repeat itself, but it often rhymes.’ That aphorism, attributed to Mark Twain, has been much on my mind lately.
Anybody wanting to get inside the minds of the wrong-headed majority that tragically voted the UK out of the EU (and probably lit a fuse to both those abbreviations) could do worse than read one of Dickens’s less known novels, ‘Barnaby Rudge’, about the Gordon riots against Catholic legislation.
Although the situation in 1780 became violent while last week’s referendum ensured peaceful mob rule, the cynical manipulation and ignorance that led to the riots should have been a cautionary tale taught to every schoolboy and schoolgirl in the last century and a half.
In the weeks, months and years ahead experts will assess the carnage to be irrevocably wrought on the UK and Europe, .
From a tax viewpoint, the immediate damage would appear to be to the UK Holding Company regime, as well as Finance Companies and IP ownership. This arises from the future removal of the parent/subsidiary directive, and interest and royalties directive. These two directives guarantee exemption from dividend withholding tax and withholding tax on interest and royalties, respectively, when paid by the other 27 EU countries to the UK. Following the UK’s withdrawal from the EU, withholding tax will be applied according to treaty. This will mean that Holding Companies, exempt from tax on their dividends, and Finance Companies and Patent Box companies paying low tax, will be at a disadvantage compared with EU jurisdictions. As the UK does not withhold tax on dividends according to domestic law, the UK is currently very popular as a holding jurisdiction – a popularity that is likely to disappear very quickly (like, tomorrow morning).
Thanks to the OECD’s BEPS project, most other disadvantages of the Brexit will already have been swept up in wider international agreements, while there may be some small advantage in not being penalized by the EU for offering State Aid to companies.
It is well known that Boris Johnson and David Cameron studied at the same elite school. While the Duke of Wellington may have declared that the Battle of Waterloo was won on the playing fields of Eton, it would appear that the Peace of Europe may have been lost on that same dot of England’s green and pleasant land.
It’s simply not cricket.