No one currently knows what Brexit will mean for the UK, its economy and its trading and other relationships with other countries. That lack of clarity extends to the effect on the UK's tax system. But can we make some informed predictions about the impact Brexit might have on UK tax policy?

The political rhetoric around Brexit increasingly suggests that we will be faced with a "hard" departure from the EU when we do leave – whereby the UK simply exits the EU, the EEA and the customs union and loses access to the single market. Whatever your view of the possible long term benefits of that approach, this surely will lead to considerable uncertainty in the business community. How would the UK position itself to stay attractive to inward investment and job creation? What could be done to keep businesses, particularly MNEs with large numbers of UK employees, committed to the UK and avoid a drain of talent and capital to continental Europe or elsewhere?

The impact on FS and beyond

The position could be particularly acute for the UK's financial services sector. There has already been discussion about the impact of possible loss of regulatory passporting rights to the rest of the EU. Some FS large businesses operating in the UK are both international and mobile, and could conceivably relocate significant parts of their current UK operations to other countries that remain in the EU: some possible destinations have already started positioning themselves for arrivals. Any material reduction in the size of the UK's FS sector would be very bad news for the Exchequer: figures produced by the City of London Corporation suggest that the sector pays or collects as much as 11% of our country's total tax take. Separate recent work for TheCityUK indicates that a very hard Brexit could put at risk up to 35,000 FS jobs and £5bn of tax revenue from the sector, before knock-on effects are taken into account.

Hard (or "clean", as its proponents prefer) Brexit could also cause considerable problems in the industrial, manufacturing and retail/consumer sectors, at least before the UK is able to put in place trade agreements with our most important trading partners.

How might tax be used to help?

The tax system provides the Government with one policy lever to address these sorts of concerns. The previous Chancellor repeatedly stated his intention to give the UK the most competitive tax system in the G20 group, with the intention of attracting inward investment and job creation, and it seems likely that this approach of using tax to make the country more attractive will continue post-Brexit.

What, then, could the government do in practice?

The UK already has, by most developed countries' standards, a low headline corporate tax rate that is intended to reduce further to 17% in 2020. George Osborne, speaking after the referendum, advocated a further reduction to 15% but the current Chancellor is reportedly not keen on that idea.

Some degree of change in the VAT system is possible – in principle hard Brexit could allow the UK to repeal VAT entirely, but given the amount of revenue VAT raises that seems highly unlikely. What is more likely is a combination of adjustment to some of the details (modernised and more coherent rules on financial services, for example) and changes to the rates of tax. Lower rates on some essential items and higher rates on luxury goods are a distinct possibility. Additional consumption/sales taxes, outside the VAT system, targeted at specific high-value items might also be an option for a government wanting to show that we are all in it together.

More radically, the Adam Smith Institute has proposed the total elimination of corporation tax, along with a number of other taxes. It seems safe to predict that this sort of dramatic policy shift is unlikely: business should not bank on the UK becoming a tax haven in the foreseeable future.

Tax and the FS sector

Recent years have seen numerous measures aimed at raising the tax paid by the FS sector and banks in particular – think of the bonus tax, the bank levy, the new banking company surcharge and the restriction on use of prior year losses. If the UK finds itself needing to persuade the FS sector that the UK remains an attractive place to do business and base operations, it is not hard to see that removing those measures would be high on the sector's wish list.

Politically, that reversal might well be difficult – accusations of being soft on the banking sector would be unwelcome for any government in the current climate, but it might be possible for changes to be phased in over time. Alternatively, the government may simply find itself faced with choosing the 'least worst' option between the risk of material decline in tax revenues resulting from FS sector exits from the UK and the risk of being seen as soft on finance.

Steps like that would at least level the playing field between FS and other sectors. Might the UK need to go further and create positive reasons for staying in the UK? Again, anything that smacks of a handout for the FS sector in particular might be politically challenging, but bear in mind that measures of more general application like postponing the apprentice levy (see below) could particularly benefit FS businesses with high payroll costs.

Employment and investment

Financial services is unlikely to be the only sector facing Brexit-induced headwinds. Falls in consumer confidence would cause problems for retailers; leaving the customs union may prompt manufacturers to reconsider the location of their factories and route of their supply chains. More generally, if there is an economic slowdown as a result of Brexit, employers may find themselves cutting payroll costs or deciding not to expand workforces.

Delaying or abolishing the apprentice levy might be one approach to tackling this. The levy was far from universally popular when it was announced, and already there have been calls for it to be shelved at least temporarily until the impact of actual Brexit is known. In the context of hard Brexit in particular, there would seem to be something in the argument that the UK should be doing all it can to persuade MNEs (in particular) to locate jobs in the UK, rather than making it more expensive for them to do so. NICs cuts, or holidays for new employers, might have a similar effect.

At the other end of the scale from MNEs, leaving the EU would mean removing the constraints on investment-related tax reliefs that derive from EU state aid rules and currently limit what the UK can do in relation to EIS, seed EIS and VCT relief. Brexit might offer the opportunity to expand those reliefs and encourage greater investment into start-up and early-stage businesses, particularly in areas such as fintech, where the UK is keen to compete for capital and talent with other jurisdictions, and to encourage job creation in areas where we want to be in the lead.

Government could also look at the tax treatment of investment disposals more widely. The UK already has a range of reliefs in place that encourage investment with reductions on tax on exit: could these be expanded, for example by turning the substantial shareholdings exemption into a full blown participation exemption? There is already a consultation running on amendments to the SSE, which could provide a mechanism for achieving this quite rapidly.

An imaginative government might also consider a "Buy British" campaign accompanied by the sweetener of (for example) enhanced capital allowances for equipment acquired from domestic producers. That sort of measure could have the twin benefits of encouraging investment and keeping the proceeds in the UK.

What happens next?

Inevitably, this is speculation at this stage. But, that doesn't mean it is necessarily idle. No one knows what Brexit means (other than "Brexit"), when it will happen or how the government might choose to respond to it. Thinking ahead to Brexit and its possible results provides an opportunity for business to consider how it might want UK tax policy to change post-Brexit, and how the case for reform can best be made. Viewed in those terms, Brexit could provide a genuine opportunity.