Co-operative UK. Accounting & Tax Update. Autumn 2016

Transcription

1 Co-operative UK Accounting & Tax Update Autumn 2016

2 Introduction

3 FRC: Key developments for 2016 annual reports ESMA guidelines on Alternative Performance measures (APMs) FRC has confirmed that its Corporate Reporting Review team will take the guidelines into account when assessing whether the strategic report is fair, balanced and comprehensive Key requirements of guidelines: Appropriate description of APM Explanation of how APM is calculated Explanation of why APM is relevant Equal prominence for a related GAAP measure Reconciliation of APM to GAAP measure explaining material items 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 3 Document Classification: KPMG Public

4 FRC: Key developments for 2016 annual reports Strategic report guidance Explanations to be clear and concise assisted by focussing on material matters Smaller companies to ensure adequate discussion of financial position and cash flows Business model reporting - Explanation of how a company makes its money and what differentiates it from its peers - Risk reporting and viability statements Consider a broad range of risks e.g. cyber and climate change Little variation in disclosures between business sectors Clearly explain viability period chosen, with qualifications and assumptions - Impact of UK referendum result Company specific disclosure / quantification as effects become less uncertain 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 4 Document Classification: KPMG Public

5 FRC: Key developments for 2016 annual reports Financial statement disclosures areas of focus Tax Greater disclosure of the factors affecting tax rates and their sustainability Explanation of how account for material tax uncertainties Dividends Improvements suggested to link dividend policy with risks and capital management decisions facing the company CA 2006 does not require disclosure of distributable profits Low interest rates Provide sensitivity analysis to highlight potential impacts (e.g. on pension deficits and impairment testing) 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 5 Document Classification: KPMG Public

6 FRC: Key developments for 2016 annual reports Financial statement disclosures areas of focus Critical judgments and estimates Better explain the sources of estimation uncertainty that may impact results Include sensitivities or ranges of outcomes? Accounting policies Revenue recognition especially from complex long-term contracts Developments in IFRS Disclose progress on implementation and likely impacts when they can be reasonably estimated Developments in UK GAAP Removal of requirement to notify shareholders to gain disclosure exemption 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 6 Document Classification: KPMG Public

7 Accounting

8 Agen da UK GAAP Dividends Revenue recognition Leases 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 8 Document Classification: KPMG Public

9 FRS 101/FRS 102 Lessons Learnt Business Combinations o Still judgement on treatment of contingent consideration (Salary versus Consideration) unlike IFRS. o Consideration of other intangibles needs early consideration may require specialist valuation support. o Complexity for stepped acquisitions and contracts to acquire non-controlling interests. o Group reconstruction merger accounting or acquisition accounting? Investment Properties o Increased number of Investment Properties on BS. o Includes properties rented to group companies in most circumstances. o Judgement if no formal arrangement and property not generic in nature. o Accounted for at Fair Value through P&L. o Annual valuation required. Financial instruments o Challenge of determining if basic or other financial instrument. o 6 criteria must be met for basic debt instrument classification. o Significant impact on financial statements depending on classification. o Inter-group long term loans not on commercial terms. o Nominal interest charge can impact on ability to pay dividends. Transitional relief PPE at deemed cost o Companies Act requires maintenance of a separate revaluation reserve. o Future impairments cannot be net against release in revaluation reserve in P&L. o Annual transfer in SOCIE 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 9 Document Classification: KPMG Public

10 Agen da UK GAAP Dividends Revenue recognition Leases 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 10 Document Classification: KPMG Public

11 IFRS 15 Implementation timeline Effective for periods beginning on/after 1 January 2018 IFRS comparative period Effective Date Early adoption permitted prior to the effective date 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 11 Document Classification: KPMG Public

12 The five-step model a reminder 1 Identify the contract with a customer 2 Identify the performance obligations in the contract 3 Determine the transaction price 4 Allocate the transaction price to the performance obligations in the contract 5 Recognise revenue when (or as) satisfy a performance obligation 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 12 Document Classification: KPMG Public

13 Revenue accounting real life impacts (1) Point in time or over time? A manufacturer operates as a sub-contractor, manufacturing and installing balconies for major apartment developments. It invoices the main contractor and recognises revenue on installation (i.e. at a point in time). Is this permissible under IFRS 15? What is the promise to the customer? An energy company provides an agreed level of power to a factory by installing and operating generators on nearby land. The payments by the factory owner are 250k to cover installation of the equipment, 2m for the power and 150k to cover removal of the equipment. The energy provider recognises revenue in line with the payments. Is this permissible under IFRS 15? 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 13 Document Classification: KPMG Public

14 Revenue accounting real life impacts (2) What are the rights and obligations? A manufacturer sells a chemicals processing machine at a reduced margin on the basis that the customer agrees that it will buy the consumables necessary to operate the machine exclusively from the manufacturer. The manufacturer recognises a higher margin on the machine than the cash price would suggest as it will recoup the margin on future consumables sales. Is this permissible under IFRS 15? Over-time transfer of control is recognition of WIP permitted? A manufacturer of complex industrial machinery (which takes several years to manufacture) has historically recognised revenue and costs on a stage of completion basis expensing costs and recognising revenue as each manufacturing milestone is achieved. WIP is recognised for work to date on incomplete milestones. Is this permissible under IFRS 15? 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 14 Document Classification: KPMG Public

15 ESMA IFRS 15 Public statement Illustrative timeline and good practice disclosure Annual financial statements Explanation of how the key IFRS 15 concepts will be implemented for different revenue streams Implementation timeline Quantitative impact of IFRS 15 (where it is known or can be reasonably estimated) Qualitative information (when the quantitative information is not available) 2017 Interim financial statements IAS 34 Interim Financial Reporting does not require specific disclosure However, ESMA encourages issuers to disclose: Information required in the 2016 annual financial statements if it was previously not disclosed; and More specific information if it becomes available since previous financial statements Annual financial statements Qualitative impact from the application of IFRS 15 Changes to revenue and other quantitative information reported under IAS 11/IAS 18 More developed and elaborated information if it becomes available since previous financial statements Effective Date KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 15 Document Classification: KPMG Public

16 Agen da UK GAAP Dividends Revenue recognition Leases 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 16 Document Classification: KPMG Public

17 IFRS 16 Leases a quick quiz (true or false?) 1. The standard is effective for periods starting on/after 1st January IFRS 16 can be adopted any time before 1 January IFRS 16 redefines a lease: lots more arrangements will be leases under the new standard 4. Essentially, the requirement is to bring all leases on balance sheet (except small or short leases). 5. Under the new model, the balance sheet will show (at the start of a lease) a liability for the lease payments and a corresponding right of use asset 6. In working out the lease liability it is assumed that the lease will run for as long as possible (i.e. all renewal/extension options will be exercised) 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 17 Document Classification: KPMG Public

18 IFRS 16 Leases a quick quiz (true or false?) 7. The lease liability is calculated using a standard borrowing rate for all leases (as working out a lease-specific rate would be a pain!) 8. The lease liability will include an estimate of the rentals payable on the use of an asset e.g. turnover rent. 9. Under the new model, the P&L rent charge is replaced by interest and depreciation which will increase EBITDA 10. The standard is applied at the start of the comparative period in the first set of financial statements adopting the new requirements (and there are transition rules to make this accounting easier than full retrospective application) you d like this to be true!!! 11. The biggest challenges will be identify all the data necessary to do the accounting, determining your transition approach, understanding other business impacts (like covenants) and establishing a system to deal with the accounting on an ongoing basis I ll help; this one s true! 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 18 Document Classification: KPMG Public

19 Modelling of transition options Illustrative net P&L impact 800, , , ,000 (200,000) (400,000) Fully Retrospective Modified (asset recalculated) Modified (asset = liability on transition) C5 (a) Retrospective change C5 (b) In year effect, C8 (b) (i) asset recalculated C5 (b) In year effect, C8 (b) (ii) asset = liability on transition 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 19 Document Classification: KPMG Public

20 Agen da UK GAAP Dividends Revenue recognition Leases 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 20 Document Classification: KPMG Public

21 Realised profits Only realised profits are available for distribution A profit is realised where the consideration received by the company is qualifying consideration. Qualifying consideration includes the following: - cash - an asset that is readily convertible to cash - the release, or the settlement or assumption by another party, of all or part of a liability of the company - an amount receivable where: the debtor is capable of settling the receivable within a reasonable period of time; there is reasonable certainty that the debtor will be capable of settling when called upon to do so; and there is an expectation that the receivable will be settled Transactions and arrangements should not be looked at in isolation. A realised profit will arise only where the overall commercial effect on the company satisfies the definition of realised profit 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 21 Document Classification: KPMG Public

22 Top slicing Parent Sub A Sub B What is the realised gain in Sub A? Sale of Sub C for 150m (book value of 100m) Sub C Sub B pays: 50m cash 100m long term debtor 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 22 Document Classification: KPMG Public

23 Impairments impact of subsequent dividend flow Parent 1,000 dividend? Sub A Sub B 1,000 dividend For holding companies with limited trade of their own the identification of an investment impairment is likely to mean the full dividend received cannot be flowed further up the chain to the ultimate parent (assuming no other reserves available) Assume in the example above that Sub A has only 1 of existing reserves at the date of dividend receipt If the receipt of a dividend from Sub B impairs Sub A s investment in its subsidiary by 200 how will this affect the amount of distribution Sub A can make to its parent? 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 23 Document Classification: KPMG Public

24 Waiver of inter-company balances Parent P owes Sub B 50,000 Sub A Sub B Sub B has 100,000 of distributable reserves Can Sub B waive the loan receivable of 50,000? 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 24 Document Classification: KPMG Public

25 Agenda 1 Corporate Tax Update Steve Abbott 2 Capital Allowances and tax relief on property Richard Jones 3 SDLT and ATED Richard Jones 4 Brexit and Governance update Steve Abbott 5 Autumn Statement Steve Abbott 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 25 Document Classification: KPMG Confidential

26 Corporate tax

27 Changes in corporation tax rates Financial year Rate 2016/17 20% 2017/18 19% 2018/19 19% 2019/20 19% 2020/21 17% 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 27 Document Classification: KPMG Confidential

28 Tax relief for interest payable Current position Generally, tax relief for interest payable and other financing costs More often than not third party interest remains deductible Range of other anti avoidance provisions exist Position post 1 April 2017 Fixed Ratio Rule will be restricted to 30% of UK tax EBITDA (group and third party) Two key carve outs - De minimis of 2m - Group Ratio Rule Any interest disallowed, and any capacity for relief unused, can be carried forward More detail expected after the Autumn Statement 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 28 Document Classification: KPMG Confidential

29 Loss relief reform No changes to capital loss rules Current position All current year losses can be set against current year profits of a group Brought forward trading losses can only be set against current year trading profits (of the same trade) in that company; brought forward non trading losses can only be set against current year non trading profits in that company Position post 1 April 2017 Losses arising after that date can be carried forward to offset against any profits in a group Losses accrued before that date still available, but: - Can only use against trading or non trading profits as appropriate - Can only relieve profits of that company - First 5m of profits can be relieved; where profits are in excess of 5m then only 50% of that excess can be relieved More detail expected after the Autumn Statement 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 29 Document Classification: KPMG Confidential

30 Capital allowances

31 The background Main pool Special rate/long life Industrial buildings allowance % 10 10% % 20 20% 18% 8 8% % % 0% there has been a general erosion of value 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 31 Document Classification: KPMG Confidential

32 Some aspects have been enhanced ECA SLA LRR 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 32 Document Classification: KPMG Confidential

33 ECAs Energy Water 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 33 Document Classification: KPMG Confidential

34 ECAs - why bother? For 1 million of capital expenditure qualifying as special rate expenditure 1,200,000 Tax Value 1,000, , , ,000 NPV for ECA (a) 120, , Note: (a) Discount rate of 5% KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 34 Document Classification: KPMG Confidential

35 Land Remediation Relief 150% Polluter doesn t get benefit 2 years - capital 4 years - revenue 16% tax credit Use of brownfield site 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 35 Document Classification: KPMG Confidential

36 LRR - land in a contaminated state Relevant harm: Death/significant injury or damage to living organisms Significant pollution of controlled waters Significant adverse impact on the ecosystem or Damage to buildings Relevant harm: Death/significant injury or damage to living organisms Significant pollution of controlled waters Significant adverse impact on the ecosystem or Damage to buildings 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 36 Document Classification: KPMG Confidential

37 SLAs - Background Best Before 4 years from first use Best Before 8 years from first use 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 37 Document Classification: KPMG Confidential

38 Capital allowances on fixtures - transactions between businesses April 2012 April 2014 Business A 1 Business B Business A 2 Business B Business A 3 Business B 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 38 Document Classification: KPMG Confidential

39 SDLT and ATED 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 39 Document Classification: KPMG Confidential

40 Relevant Budget Change Relevant to Timing announcements New SDLT 3% surcharges (also introduced in Scotland) New commercial rates of SDLT New 2% top rate of SDLT lease duty Extension of SDLT enveloping reliefs New 14-day filing/payment date for SDLT Buyers of UK residential property 1 April 2016 Buyers of commercial, mixed-use & residential property 17 March 2016 Occupiers under new rental leases 17 March 2016 Equity release scheme providers, property used for business purposes 1 April 2016 All buyers of UK property FA 2017? 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 40 Document Classification: KPMG Confidential

41 SDLT rate changes Residential property transactions Price Normal rate Surcharge rate < 125,000* 0% 3% 125, ,000 2% 5% 250, ,000 5% 8% 925, m 10% 13% > 1.5m 12% 15% Commercial property transactions Price Rate < 150,000 0% 150, ,000 2% > 250,000 5% SDLT on rent Residential property transactions (corporate buyer & no exemption from super rate) Price Super rate > 500,000 15% (slab) NPV of rent Rate < 150,000** 0% 150,000-5,000,000 1% > 5,000,000 2% *properties worth less than 40,000 are not subject to the surcharge **< 125,000 for residential property 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 41 Document Classification: KPMG Confidential

42 SDLT 3% Surcharge (cont.) Basic rules: Exemptions 1. 6/+ dwellings in a single transaction 2. Mixed-use property 3. Short leases ( 8 years) 4. Interests subject to lease with > 21 years to run 5. Dwellings worth < 40, Minor interests (eg, options, rights of light, etc) 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 42 Document Classification: KPMG Confidential

43 Multiple Dwellings Relief Basic rules: Applies to purchases of 1 or more dwellings Apportion price between residential and non-residential (if applicable) Slice system applied to the average price per dwelling Events within 3 years trigger clawback Purchase of 6/+ dwellings Average price per dwelling < 275,000 better claim MDR Average price per dwelling > 333,333 better use commercial rates Average price per dwelling Average price per dwelling 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 43 Document Classification: KPMG Confidential

44 Annual tax on enveloped dwellings Scope Residential property owned by non-natural persons Beneficial owner liable Enforcement Fixed charges payable annually Impacts on residential properties worth over 500,000 Charge Reliefs should apply but there is still a filing obligation 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 44 Document Classification: KPMG Confidential

45 Brexit and Governance

46 What? How? Governance framework for tax Tax strategy What is your appetite for risk? What are going to include in your public statement? Strategy Tax policies What are the specific objectives & outcomes for each tax? What is the control environment? Tax operating standards and controls How do you operationalise the policy? What are the key risks, and what controls do you have in place? Tax policies Operating standards and controls Tools and enabler How do you deliver and align the controls to the business? How do you facilitate this? Tools and enablers Business processes How will the business embed and operate the controls? Business processes 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 46 Document Classification: KPMG Confidential

47 Access to the single market - the trade-off Membership of EEA e.g. Norway Membership of EFTA only e.g. Switzerland Customs Union e.g. Turkey Bilateral Agreement e.g. Canada World Trade Organisation Freedom of movement of people, in exchange for access to the Single Market Adopt EU rules without being able to vote on them No access to 53 FTAs with non EU countries Customs checks Substantial contribution to the EU budget Partial access to the Single Market; limited services access Bespoke agreements with EU for different sectors Accepts free movement of people Participate in EFTA Some contribution to the EU budget Partial access to the Single Market, for some goods only Participation in the EU Customs Union Required to enforce rules equivalent to those in the EU (competition, State Aid) No role in EU decision making and no contribution to the EU budget Free Trade Agreement, phasing out tariffs on industrial and most agricultural goods Intention to extend to services Trade bound by Rules of Origin No free movement of people; no contributions to EU spending UK would be forced apply WTO tariffs on imports and exports from/to the EU, and likewise for EU members Don t have access to 53 free trade agreements with non EU countries No budgetary contributions or freedom of movement of people Market access and integration with EU National Sovereignty There is discussion of a Savile Row Brexit: British and Bespoke Mark Essex. KPMG in the UK KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 47 Document Classification: KPMG Confidential

48 People - immigration, tax, social security, Immigration International employees pensions Social security Pensions Employment tax Employee communication 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 48 Document Classification: KPMG Confidential

49 Goods and services : Indirect tax 2 90b n Imports 2 20b n Exports Value Added Tax VAT unlikely to change substantially in the short term However, VAT processes and reliefs may change Clear consequences for IT systems There may be cash flow consequences Potential for a tailored VAT system in the UK Customs Duty Potential for tariffs between UK and mainland EU Exact consequences depends on where UK ends up in trade negotiations There are also EU trade agreements with third countries which will be impacted Importance of non-tariff barriers to trade It s likely that UK exports and imports to EU goods will need to clear customs 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 49 Document Classification: KPMG Confidential

50 23 November?

51 Thank you 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo are registered trademarks or trademarks of KPMG International. Document Classification: KPMG Confidential