Tax implications of Scotland leaving EU ‘detailed and complex’ say tax professionals.

The tax implications for Scotland of leaving the EU are ‘detailed and complex’ and could have significant consequences for Scottish businesses and taxpayers, the body representing the country’s tax professionals has warned MSPs.

The Chartered Institute of Taxation (CIOT) in Scotland was responding to an inquiry being held into the economic impact of leaving the European Union by the Scottish Parliament’s Economy, Jobs and Fair Work Committee.

The analysis is based on the default scenario of the UK ceasing to be a member of the EU single market and customs union and failing to reach any withdrawal agreement containing preferential trade terms with other EU member states.

In its submission to the committee, the Institute raised the possibility of workers paying social security contributions in more than one country.

The CIOT said that current EU regulations on the coordination of social security systems between states in the EU and EEA prevented workers and businesses from paying contributions in more than one country.

But it warned that leaving the EU could increase the possibility of people moving between the UK and other EU member states (and vice versa) for work being exposed to the increased risk of having to pay double social security contributions because of the UK’s ‘limited’ and ‘uneven’ bilateral social security treaties with other nations.

The CIOT also said that the UK would need to decide on whether to introduce new legislation to impose duties on imports from EU member states.  It said that leaving the EU customs union was likely to increase costs for businesses in the form of import and export taxes and customs duties.  But it also said that leaving the EU could give the UK greater flexibility – albeit at the cost of greater complexity – if it chose to vary the tax system, particularly in the area of Value Added Tax (VAT) which is currently heavily circumscribed by EU directives.

Commenting on the submission, Moira Kelly, Chair of the CIOT Scotland Technical Committee, said:

“The tax implications of Brexit are detailed and complex.  Over the coming months, businesses and individual taxpayers will be looking to the UK Government to provide them with clarity on what leaving the EU will mean for them.  In that context, it is disappointing that, nearly five months on from the referendum, we are no further forward in understanding what the practical implications will be.

“Our analysis – modelled on the default scenario that the UK withdraws completely from the EU and fails to reach trade and customs agreements with remaining EU member states – opens the door to the possibility that Scottish businesses and taxpayers will face a range of additional financial burdens in the form of increased trading and labour costs.

“We recognise that there are a range of future relationships which the UK could have with the EU but in the absence of a credible timetable for withdrawal, we are left with more questions than answers.  The UK government needs to act quickly to spell out the implications of Brexit to allow companies to plan for the future.”


1.                   CIOT’s submission to the European and External Relations committee can be read here

2.                   A list of the UK’s bilateral social security agreements can be found here

3.                   The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Chris Young, External Relations Officer, 07900 241 584