Brexit for startups

The U.K. has voted to leave the European Union (so called “Brexit”). This is likely to have a significant effect on the economy, policy and politics. This note addresses the impact on startups in the near term.

What does Brexit mean?

By voting for Brexit, the people of the U.K. have instructed the government to begin the process of leaving the European Union.

The government will now negotiate our exit and will (at some point) trigger our formal termination notice via article 50 of the 2009 Lisbon Treaty. The notice period is two years after which the U.K. would cease to be a member of the EU and potentially would cease to be able to access the Single Market.

Are we still a member of the EU?

Yes, we are until two years after the government triggers termination. For now, nothing changes.

Are we still bound by EU laws?

Yes we are. We continue to be bound by EU legislation which has a direct effect in the U.K. until we leave the EU.

Do we still have to charge VAT?

The position on VAT (which is a Europe wide tax) remains the same. VAT registered companies will still be required to comply with U.K. and EU VAT obligations as normal.

Is there an impact on SEIS and EIS?

No. These schemes remain in place. There is no impact on the availability of these schemes to investors. It is unlikely that HMRC will take any steps to remove these schemes in the near future as they are viewed to be beneficial to the general economy. Particularly if we now go into recession, these schemes will be attractive to encourage investment into startups.

Is my EU trademark still valid?

Yes. The U.K. remains a party to all treaty and legislation relating to trademarks. EU trademarks remain enforceable in the U.K. and clients should continue to apply for EU trademarks where these are desired.

It is extremely unlikely that the U.K. would remove itself from existing trademark legislation. Any Brexit will almost certainly involve the U.K. agreeing with the EU that existing EU trademarks will still provide U.K. coverage.

Will I have to pay duties when I sell goods and services to the EU?

Nothing will change for now. Whether or not duties are imposed in the future (post-Brexit) will depend on the terms negotiated by the government. It is unlikely that the U.K. will be denied access to the Single Market.

Will my visa / right to be in the U.K. be impacted?

Nothing will change with respect to visas for non-European nationals unless changes are announced by the government. For EU nationals, free movement of people still applies up until we actually exit the EU. For now the position remains the same.

In reality, it is very unlikely that EU citizens currently living in the U.K. will be affected. It might be worth such citizens seeking to secure a U.K. passport where available. However any changes to immigration rules will take place after Brexit (in at least two years time).

Conclusion

Nothing has changed from yesterday. The U.K. remains part of the EU and will continue to be a member for at least two years.

Whilst the press will be full of scare stories (and we are in for a roller coaster in terms of the economy and politics) the legal, taxation and accounting position for startups remains unchanged.