On 1 February 2020, the United Kingdom left the European Union. In a decision The State Secretary for Finance explains the tax implications of the withdrawal agreement.
Transition period
The Withdrawal Agreement concluded between the European Union and the United Kingdom sets out a transition period. This transition period ends on 31 December 2020. The Withdrawal Agreement provides for the possibility of extending the transition period. However, it is not yet clear whether this option will be exercised.
During the transition period, (virtually) nothing will change. EU law will continue to apply. The United Kingdom will be treated as a Member State of the European Union until 31 December 2020.
The transitional period also applies to VAT, excise duties, BPM, import duties and similar charges.
So what?
The transition period gives the United Kingdom time to adapt its national legislation. With effect from 1 January 2021 (unless the transition period is extended), the United Kingdom will become what is known as a ‘third country’. This could have far-reaching consequences for your tax position. You still have (at least) 11 months to prepare for this.