Brexit Bites, 20 March 2018

Mar 20, 2018

Following negotiations that spanned across the weekend, the EU and UK have reached agreement which is likely to see talks move onto the future trading relationship.  In other news, in the first of our series of getting back to the basics of Brexit, we refresh ourselves on how the Brexit vote first came about. 

A Brexit breakthrough?

A breakthrough in the Brexit talks was reached in Brussels yesterday when David Davis and Michel Barnier told reporters that the EU and UK are now working off the same Withdrawal Agreement which means that talks are likely to be able to move on to the much coveted future relationship.  In what was described by the EU chief negotiator, Michel Barnier as a “decisive step”, both sides reached agreement on the financial settlement, citizens’ rights and a transitional period.

On the issue of the border on the island of Ireland, it was agreed that Northern Ireland would be subject to a “backstop” arrangement unless a better solution to avoiding a hard border can be agreed.  This repeats the mantra of the deal reached back in December of avoiding a hard border. Since then, the EU has consistently said that there cannot be backsliding on this agreement. 

Speaking at a press conference yesterday, UK chief negotiator David Davis said “we agree on the need to include legal text detailing the ‘backstop’ solution for the border between Northern Ireland and Ireland in the Withdrawal Agreement that is acceptable to both sides.”

The transition period which is seen as critical for the smooth ongoing operation of many businesses will run until 31 December 2020. During that time, the UK will have to continue to obey EU rules but will largely have no influence on making the rules.  On citizens’ rights, it was agreed that UK and EU citizens who arrive during the transition period will have the same rights as those who arrived in the respective countries before Brexit and the Common Travel Area between Ireland and the UK will continue in existence. 

A colour coded system of green, white and yellow has been agreed upon in order to chart the progress of the individual items in the Withdrawal Agreement.  Green means the element has been agreed in the negotiations, yellow means that the element has been agreed but the detail is still worked through; while white means and item has been put forward by the EU and is being negotiated.

The guidelines are now being sent to the EU leaders and the European Council will meet on Thursday and Friday where they will review the guidelines in detail.

 

Going back to the very beginning – the vote

In the first in our new series in Tax News of getting back to the basics of Brexit, we examine how the vote to leave the EU came to pass in the first instance. 

The UK people historically voted to leave the EU by referendum on 23 June 2016.  Article 50 of the Treaty of Lisbon, the mechanism by which the UK must leave the EU was triggered on 30 March 2017 and gave the UK two years to leave. This means the leaving date has been set as 29 March 2019.

What is Brexit?

It’s a merge of the words Britain and exit.  The term can also be found in the Oxford dictionary where it is defined as “the withdrawal of the United Kingdom from the European Union.” 

How did each part of the UK vote?

The UK voted by a majority of 51.9 percent to 48.1 percent to leave the EU.  More than 30 million voted in total representing 72 percent of the population.   England and Wales voted to leave the EU with 53 percent and 52 percent of the votes respectively.  Scotland backed to remain in the EU with 62 percent of the vote and 56 percent of Northern Ireland voted to remain.

Why was there a vote?

Since the economic recession of 2008 and the crisis in Greece, the UK people have questioned the benefits of remaining in the EU particularly when the UK economy remained relatively robust.   Record levels of EU immigration into the UK and increasing EU regulation were also factors for the growing anti-EU sentiment. 

What were seen as anti-European parties enjoyed a rise in popularity in the UK in 2012 and backbenchers demanded that the then Prime Minister David Cameron announce an EU referendum to help fend off the anti-EU challenge.  In 2013, Mr Cameron said that he would hold a referendum on EU membership if the Conservative party won the 2015 election.  Which they did and here we are. 

What was the UK Government’s position at the time of the vote?

Before the referendum vote, Mr Cameron voiced support of the UK remaining in the EU by saying “The choice is in your hands but my recommendation is clear: I believe Britain will be safer, stronger and better off in a reformed Europe”.  

The UK voted to leave and Mr Cameron resigned and was replaced by the now Prime Minister Theresa May.  Theresa May was against Brexit during the referendum campaign but now says it’s what the British people want.

Why call a snap election?

What might have come as a surprise to most, Theresa May called an election for 8 June last year.  She reportedly felt that the opposition parties would try to block her Brexit strategy and wanted to show a united front. However, the result of the election didn’t go to plan. The vote failed to give the Conservatives an overall majority in parliament so Theresa May went into government with Northern Ireland’s Democratic Unionist Party. 

What’s been happening in the Brexit talks?

Brexit talks started in Brussels on 19 June 2017 and there have been several rounds of negotiations so far.  Teams from the EU and the UK meet for around one week at a time.  The timetable for the talks has two phases. 

The aim of phase one was to reach agreement on the rights of citizens, the financial settlement the UK will need to pay on leaving the EU as well as the border in Northern Ireland. While it was hoped last October that the talks could move onto phase two where the future trade relationship would be discussed, this was delayed until December where some progress was reported. 

At the moment, talks continue and it’s expected that they will soon move on to the future trade relationship (phase two) when the European Council meet at the end of the week.  The UK have agreed that a hard border must be avoided on the island of Ireland and need to put forward clear proposals as to how this would occur.

The EU wants to reach an agreement on trade by October 2018 which will give six months to legislate for this agreement. All eyes are on Brussels as the clock ticks.

Tune in next week where we will be looking at the difference between the Customs Union and the Single Market, what a hard border means, customs checks, tariffs and much more.

 

Read all of our Brexit updates on the dedicated Brexit section of our website.