McDermott lawyers comment on the ramifications of exiting the European Union and the road ahead
LONDON, Jan. 31, 2020 /PRNewswire/ — Today the UK officially leaves the European Union after four years of debate and a recent General Election where the Conservative Party won a landslide victory. McDermott’s London lawyers have provided their perspective on how the passing of Brexit Day may affect healthcare and taxes over the coming months.
Healthcare transaction and regulatory – Sharon Lamb
“The UK will leave the European Union on the 31 January and, up until 31 December, existing law derived from Europe will remain in place, giving some very limited breathing room for the negotiation of a comprehensive trade deal and clarity on the future regulatory regime for health and life sciences.
“This is a very short period. Whilst, the Withdrawal Agreement secured the rights of migrant patients and staff to ongoing healthcare, there remains a real risk that if terms are not agreed by the 31 December, that the UK will exit without any deal, leading to disruption to clinical research and the manufacture and supply of medical devices and medicines. Many medicines and devices manufacturers are already well prepared for a dual track regime but key questions remain about the future regulatory regime for medicines and medical devices, particularly if the UK diverges from the EU regulatory framework for approvals and certifications.
“The terms of a future trade deal are also relevant to the procurement rules that apply in the UK, particularly in terms of health services where the government has committed to a significant departure from EU rules and the move to a more flexible (and as yet unclear) ‘best value test’.”
International and Domestic Corporate Tax – James Ross
“The passing of Brexit Day itself will not see any changes so far as tax is concerned – the key date from that perspective will be the end of the transition period on 31 December 2020, assuming it is not extended.
“We do have a reasonable idea what is likely to happen to VAT at that point, and businesses doing cross-border trade in EU goods and services are starting to adapt their supply chain policies and procedures to address the decoupling of the UK’s VAT regime from the common EU system.”
“It is rather less clear what will happen in the direct tax field. As things stand, UK companies may lose the benefit of EU directives giving them exemptions from withholding taxes on payments they receive from their EU subsidiaries, and may consider restructuring as a result. They will no longer be able to undertake tax-free cross-border mergers, and in certain circumstances EU companies may lose the ability to rely on tax treaties with the US where their ultimate shareholders are in the UK. However, the UK will be implementing the stringent new ‘DAC6’ tax disclosure rules from 1 July 2020, as it is still obliged to follow EU law during the transition period. These will require disclosure to HMRC of much cross-border structuring, even where undertaken for entirely commercial purposes. So far as tax is concerned, many businesses may feel that they are losing many of the benefits of EU membership while retaining the corresponding burdens.”
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SOURCE McDermott Will & Emery LLP Inc.