Brexit – concerned and bemused of Coventry

Recently we have seen a stronger than ever hint that there may be a two year (possibly three) transitional period from March 2019. Sadly, there was little flesh behind this, but the inclination is to believe that the UK will continue to benefit from regimes similar to the Single Market and the Customs Union.

I’ve mentioned transitional phases before, and the most famous one is in respect of completing the Single Market – in brief it was never completed and the five-year transitional phase became the current position. You might say it is a nice ploy to get politicians out of difficulty, not quite as effective as dropping something of the back burner, or kicking it into the long grass, but still effective.
But I am still left bemused and concerned.

My bemusement is simple – I do not understand international diplomacy, and certainly not the diplomacy between the UK and the EU. Access to the Single Market and the Customs Union is one such aspect. During the exchange of entrenched opinions in the weeks preceding 23 June 2016 (the date of the “in/out” referendum in the UK) various comments were bandied about regarding the divorce settlement that the UK would have to pay to leave the EU. Those convinced about leaving were adamant that it would be €nothing, whereas the remainers often quoted €50,000,000,000. From my position as a UK citizen (well, an EU citizen as well), it seemed to me that the UK had entered into an agreement meaning that it would have to pay a divorce settlement. I had no idea how much it would be, but must admit to accepting the €50,000,000,000 number seemed to have more credence than €nothing.

Roll forward 13 months, and now that debate amongst the protagonists has changed, as indeed have the protagonists. The UK Foreign Secretary says that the EU can whistle for the divorce settlement, and the French finance minister now wants €100,000,000,000. Clearly, we now face a cantankerous divorce, and in the real world we all know how awful that the type of divorce tends to be, and that it gets dragged out for far too long, with the lawyers being the only people making any real money out of it. And I’d say that is where we are with the two to three-year transitional period now becoming more tangible daily.

But, joining clubs like the Single Market and the Customs Union means payment of an entry fee. So, is the current position that the UK needs to pay a divorce settlement, but then pays again to maintain access to the Single Market and the Customs Union. It seems to me like having to pay twice. And that is why I think that the divorce settlement cannot be made before trade talks begin. The two are inseparable. It is not right to have to pay to leave a club and then pay again to come back in, certainly when membership has benefits to both sides.
And that is also why I am concerned, or at least partly so. If the divorce is cantankerous it may become increasingly cantankerous on trade between the UK and the EU, may well drive more and more businesses away from the UK, and leave all EU (i.e. including the UK) businesses in the dark until too late in the day.

As for the UK VAT perspective, we also have the prospect of the Brexit impact to contend with by the end of March 2019, whilst at the same time businesses are being expected to complete the preparation for “Making Tax Digital”, which really ought to be called real time tax reporting, something that cannot be completed until we know the changes required from the Brexit impact. In the meantime, other changes intended for the same date are to be completed – those involving fulfilment houses, where massive VAT rule changes will be seen (to prevent avoidance), but where many in the sector are also heavily involved with the Brexit impact. In this aspect of Brexit, the only winners will be tax consultants, accountants, lawyers, software houses and IT consultants.

Forgive the analogy, but right now it does feel like UK businesses are to be sent over the top in the front line, by a leader standing safely behind the lines, with no instructions except to keep marching straight on. Perhaps that is why so many are deserting the UK already.

It is time for tangible information to be given to businesses trading between the UK and the EU so that they can start to plan their business strategy. Instead we remain reliant on soundbites and leaks. This is just not good enough.

So here I sit, in the city of Lady Godiva, who rode naked through our streets to protest at her husband’s taxation of the citizens of the city, protected only by her chastity. Here I sit bemused and concerned protected solely by my PC. And whilst all readers would beg that I don’t get on Godiva’s white horse, I think it is time for someone to drag the UK Government and the EU into the real world. I was going to say, “and to open their eyes”, but we all know what happened to Peeping Tom.

Steve Botham