Charities and Brexit



It is only as of 1 January 2021 that the real implications of the referendum decision vote take effect

Introduction


Four and a half years after the 2016 referendum, the UK has now left the EU. While the UK ceased to be a member state at the end of January 2020, all previous arrangements remained in place during the transition period so there was no practical effect. It is only as of 1 January 2021 that the real implications of the referendum decision vote take effect.

Two principal legal agreements have been put in place. The Withdrawal Agreement in late 2019, and then the Trade and Co-operation Agreement (TCA) which was finally concluded on 24 December 2020.

  • The Withdrawal Agreement dealt with citizens' rights (affecting EU citizens living in the UK and vice versa); the financial settlement (what the UK had to pay to the EU); the future position of Northern Ireland (especially trade arrangements intended to preserve the open border with the Republic of Ireland).
  • The TCA principally deals with institutional provisions (the governance of these arrangements between the EU and UK); economic arrangements (especially trade in goods and services, and level playing field guarantees – state aid); law enforcement and judicial cooperation in criminal matters; and dispute settlement.

The main government page with information on the transition is here.

There are many areas not covered by the agreements in which the situation is continuing to evolve and so we do not yet have a clear picture of what UK charities' relationship with the EU will look like and vice-versa. Given the diversity of the charity sector, charities will be affected differently depending on what they do, how they are funded and how they are staffed and managed.

We set out in this report the areas which we think are going to have the greatest impact on charities and speculate what positives may result from Brexit for the sector.

The bigger picture

The deal with the EU can be viewed as the first step in an evolving relationship. We are hopeful that one positive will be that charities now have greater scope to influence future direction in areas which matter to them.

Notably, one feature of the TCA is that the governance arrangements include obligations to "consult civil society on the implementation of this agreement and any supplementing agreement" and to organise a Civil Society Forum to discuss the implementation of the agreement. This opens up the possibility of charities having direct input into policy-making. The obligation to consult is also on the EU, so charities will also be working with partners in the EU to shape policies there.

Data: EU-UK Post-Brexit Deal Keeps Data Flowing (for Now)

Data is crucial for many charities, as with other organisations. With the much anticipated TCA, many organisations were scanning the deal to see what the final agreed position was in respect of data protection: in particular, whether the UK was now a 'third country' for data protection purposes. This would mean transfers of personal data from the EU to the UK would (from 1 January 2021) need to be exempt under the GDPR or extra measures would need to be taken to ensure the legal adequacy for any such data imports.

Other key areas

Contracts

It is worth doing a wider contract review at this stage, as some may no longer operate as intended. Charities should consider any territorial restrictions or delivery obligations which may be impacted by the UK's departure from the EU.

VAT

VAT is a European tax, and now that the UK is a third country so far as the EU is concerned, there will be inevitable changes in VAT procedures, especially for cross-border changes on goods and services. This does provide an opportunity to make changes to the current rates which may be beneficial.