Reality Check

Brexit: Claims about EU tax rules fact-checked

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There have been posts on Twitter for over a year claiming that Brexiteers' enthusiasm for a swift departure from the European Union (EU) is because of new tax rules that are about to come into force.

Here's a recent example from actor and writer David Schneider.

But the rules are, in fact, all already part of UK law. A small number of them will not come into effect until 1 January, but that would have happened anyway whether or not the UK was a member of the EU.

The EU's Anti-Tax Avoidance Directive (Atad) is an attempt to make sure companies (especially big digital companies and other multinationals) pay enough tax.

There are five aspects to the rules. Three of them were largely already part of UK law before the EU started working on its directive (a few tweaks have been needed to bring them into line with the EU version). They are:

  • General anti-abuse rule - makes complicated plans to reduce tax bills ineffective, even if there are no specific rules against the particular scheme
  • "Controlled foreign companies" - means if companies shift profits to companies they own in lower-tax countries, the profits will still be taxed in the country of the parent company
  • Exit tax rules - stops EU-based companies moving new products to lower-tax countries just before their development is completed to avoid tax

The other two parts were added to UK law in response to the directive and have already been passed. They are:

  • Corporate interest restriction - stops a company reducing the tax it has to pay by paying excessive interest charges to another company, usually one that it owns in a different country
  • Anti-hybrids rule - stops companies exploiting differences between countries' tax rules

While the UK is still in the EU, the EU could decide that the way the UK has implemented Atad is not consistent with the directive, but any changes would be unlikely to be huge, experts say.

So it's hard to find anything happening in January 2020 to these rules that looks significant enough to influence the speed at which some people might want to leave the EU.

The directive was produced in response to recommendations from the Organisation for Economic Co-operation and Development (OECD), and the UK will remain a member of that group after Brexit.

It should be noted that leaving the EU will mean future governments could remove any of these laws that they could get a majority for, but there has been no suggestion that the current government plans to do so.

Where it came from

The idea seems to have originated in this article from August 2018 with the headline: "Is this the real reason why Farage and Rees-Mogg want a speedy Brexit?"

It was written by two members of Lawyers Against Brexit, who were asked to comment for this piece but have declined to do so.

The piece was still being linked to in March by Labour's David Lammy.

The original article talked about the deadline in January 2019, which was when the interest restrictions, controlled companies and the general anti-abuse rules had to be in place. During 2019, the focus of the memes has turned to January 2020, which is the deadline for the other two areas (exit tax and anti-hybrids).

There were early references to the article by a Liberal Democrat councillor and shortly afterwards in a widely-shared post featuring a picture of Jacob Rees-Mogg wearing a top hat.

It's also been referred to by Oliver Murphy. And it has been debunked a few times along the way by this extended blog post, and by Full Fact, which cited the claim being made by presenter Terry Christian.

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