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In brief - Brexit - the secondary legislation process and the potential impact on charities


Brexit and EU

Following the EU referendum, the Government gave itself broad powers to make secondary legislation, and to use it to make changes to existing acts (primary legislation) under the European Union (Withdrawal) Act 2018. These have been referred to as “Henry VIII powers” and essentially allow the Government to correct deficiencies in retained EU law and prepare UK law for Brexit.

The sheer scale of the task and the limited time the government has to draw up and enact the necessary secondary legislation (which is estimated to be between 800 and 1,000 separate enactments), as well as the minimal scope for parliamentary scrutiny or amendment, may mean that any mistakes and unintended consequences arising from the legislative task presented by Brexit only to come to light once the secondary legislation has been made and has come into force. Finding examples is not an easy task: the explanatory notes attached to secondary legislation do not necessarily explain this type of change and the content of secondary legislation typically makes little sense unless it is placed within the wider legislative jigsaw of which it is a piece.

While we have not thus far identified any examples of such problematic legislation that might materially affect charities operating in the UK and/or the EU, it is clear that there will likely be secondary legislation that will be of relevance, particularly in relation to how charities are defined and other technical changes. For example, the definition of “relevant territory” in paragraph 2 of Schedule 6 to the Finance Act 2010 is used to determine whether the jurisdiction condition (which must be satisfied for a body of persons or trust to be a “charity”, for the purposes of income tax, capital gains tax, corporation tax, inheritance tax, various stamp taxes, ATED and diverted profits tax) is satisfied. This definition is predicated on the UK being a member state of the EU, and the regulations address this by removing the reference to “other than the United Kingdom” from paragraph 2(3)(a).

Thus, we would recommend that charities stay vigilant of any (potential) changes of relevance, as well as potential exposure points both leading up to Brexit and beyond it. There is still significant uncertainty about the impact of secondary legislation (and Brexit generally) in the short and long term, but staying abreast of any potential legal modifications will help charities best prepare for the future.

If you require further information about anything covered in this briefing, please contact Benjamin Pass, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances. 

© Farrer & Co LLP, November 2019

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