UK tax disputes and a no-deal Brexit

• EU derived legislation will continue to have effect in the UK after exit day
• If no-deal, claims based on 'general principles of EU law' cannot be brought after exit day, but those based on 'retained law' can be
• No new references to the CJEU can be made after exit day

EU derived domestic legislation, as it has effect in UK law immediately before exit day, will continue to have effect in domestic law on and after exit day.

Proceedings cannot be commenced after a no-deal exit where they rely on general principles of EU law. In the event of no-deal, proceedings can only be commenced after exit day where they relate to retained EU law, and the EU law issues will be determined by UK courts and Tribunals.

Disputes which may be particularly affected are those relating to EU taxes, particularly VAT, but also those direct tax claims with arguments relying on EU principles such as the free movement of capital.

If the UK leaves the EU without a deal then the current position, unless there is further legislation altering the existing legislation, is that:

• claims in the tax tribunals or UK courts which have 'commenced' before exit day and rely on EU law will be protected by transitional provisions
• there will be no right of action after exit day for claims based on 'general principles of EU law' which have not commenced before exit day
• claims which rely on 'retained law' will be valid after exit day and
• ·no new references to the CJEU can be made after exit day.

The European Union (Withdrawal) Act 2018 repeals the European Communities Act 1972 on exit day. It also sets out the position in the event that there is a no-deal Brexit.

In accordance with the EU Withdrawal Act 2018, if proceedings are commenced before exit day then they are protected by the transitional provisions. Therefore any claims which have properly commenced before exit day and rely on EU law would not be invalidated after exit day.

However, the EU Withdrawal Act 2018 provides that there will not be any right of action in respect of claims based on 'general principles of EU law' commenced after exit day in the event of no-deal. However, this does not apply in relation to any proceedings begun but not finally decided before a court or tribunal in the UK before exit day even in the event of no-deal.

Anyone with a possible claim which relies on general principles of EU law may need to ensure that proceedings for those claims have begun before exit day so that they are not potentially invalidated after exit day in the event of no-deal.

Reference to the CJEU

It will no longer be possible to make a reference to the Court of Justice of the European Union after exit day in the event of a no-deal exit based on the current arrangements.

As things stand there are no arrangements for references made by UK Courts, which are in the CJEU system but not determined before no-deal exit day, to run their course. It is possible they will just fall away and that the referring UK Court will have to determine the EU issues without the CJEU ruling on the case.

EU law as authority in UK tribunals and courts

EU derived domestic legislation, as it has effect in UK law immediately before exit day, will continue to have effect in domestic law on and after exit day. This will cover things like the UK's VAT regime. Various sets of regulations have been made which make changes to the retained law, if the UK leaves without a deal. In addition, direct EU legislation, in so far as it is operative immediately before exit day, will form part of UK law on and after exit day.

A UK court or the tax tribunals will not be bound by any principles or decisions made by the Court of Justice of the European Union (CJEU) after exit day and the UK will not be able to refer any matter to the CJEU after exit day.

Any question of the validity, meaning or effect of any 'retained EU law' will have to be decided in accordance with any retained case law and retained general principles of law and having regard to the limits to EU law immediately before exit day. This also applies to any retained EU law which is modified on or after exit day if it is consistent with the intention of the modifications.

The UK's Supreme Court will not be bound by any EU case law and in deciding whether to depart from any retained EU law must apply the same test it would apply when determining whether to depart from its own case law.