01 Jul 2016

CAPITAL letters - Issue 14


Got the Brexit blues?

The markets have been in turmoil since Friday's shock Brexit vote, causing the PM to resign and plunging the Labour Party into civil war. It's easy to get carried away with the emotion of the moment, so it's good to take stock of the facts and, wherever possible, look for the upside. I have to admit that this was not an easy task, given the mountain of economic bad news, but I've tried my best. Here we go:

  1. It ain’t over 'til it's over
    Yes, the country voted to leave the EU, but it was a slender majority and the referendum had no legal force. The EU cannot force the UK government to invoke Article 50 and because Parliament is supreme – and the vast majority of MPs are pro-remain – it's easy to imagine a constitutional stalemate emerging. Remember the Mexican standoff in Reservoir Dogs? – it will be just like that but without the cool names (although Jeremy Corbyn as "Mr Red" has a ring to it).

    We cannot rule out the possibility of 'remain' or a segue into the EEA (or some form of EEA minus) – either of which would mean that the UK would retain access to the common market. A full-fat exit is, of course, possible - but by no means inevitable. European politicians are famously good at deal making – don't forget that Ireland had two referenda go against EU treaty changes but, after a barrel full of EU fudge, those were re-taken and the decisions overturned.

  2. No government is good government?
    Some countries, like Belgium and Spain, can get by quite well without a government. We still have one but it will be paralysed until this current drama concludes. In the meantime, major legislative initiatives – other than those Brexit-related – are unlikely to be forthcoming. As such, could it be that the non-dom reforms and the proposed new rules on IHT could be pushed onto the back burner? Given that the Brexit vote has been regarded as a massive 'two fingers' to the rest of Europe, perhaps bashing non-doms, many of whom are European, would be regarded as unseemly. Anyway, the point is that whilst the two main parties fight over who their leaders will be and parliament is transfixed by a single issue, there will be precious little time for anything else.

  3. UK property now a bargain
    Sterling has plunged to historic lows against the Dollar, less so against the Euro, but either way it makes UK property better value for money. Together with the higher rate of stamp duty and the continuing sense of doom on the part of sellers, there will arguably be many bargains for canny investors in the months to come.

  4. There's no place like home
    Currently the UK has the best tax regime for wealthy foreigners and even the proposed non-dom reforms in 2017 are pretty benign. London is still the world's global city and there is nowhere more exciting or cosmopolitan to live (yes, I'm biased). The majority of wealthy non-doms are non-EU citizens, so arguably the Brexit makes no material difference. My strong feeling is that the international elite will continue to be drawn to our capital city. How am I doing?

  5. Steady as she goes
    Much of our tax law is influenced by EU rules, for instance the freedoms of establishment and movement of capital. If the UK leaves the EU completely then this will throw into doubt the efficacy of structures based in (for instance) Dublin, Luxembourg and Malta. However, the UK is still part of the EU and, as noted above, a full divorce from it is by no means certain; in the meantime these tax rules will continue to apply. There may be similar concerns over the immigration status of EU nationals currently living and working in the UK, but the PM has confirmed that EU nationals already present in the UK will be unaffected. So, don’t expect our domestic laws to change anytime soon, and when they do be assured we can cope.
    That’s it – a valiant effort I think you will agree. The main point is not to get into a tailspin just yet – as and when any tax or immigration laws change we will have plenty of notice and, with the right help from your friendly lawyer, they can be managed. Done.

Your household tip

If you knocked your glass of mineral water over in the excitement of the Brexit vote on Friday morning and have only just now looked at the damage, don’t worry. What we will do is rub Vaseline into the water stains on the wood and leave it there for a while (for bad stains overnight) and then wipe off. This sounds madness I know, but it will deal with the stain and make your coffee table look like new.



James Quarmby

James Quarmby

T:  +44 20 7809 2364 M:  +44 7958 776 759 Email James | Vcard Office:  London

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