The Taxation (Cross-border Trade) Bill passed its second reading on 8 January 2018. The financial secretary to the Treasury confirmed the government will look at ways to minimise adverse cash-flow effects on small businesses of the move away from EU acquisition VAT to import VAT. In an exchange of correspondence with the chair of the Treasury select committee, the chancellor has declined to rule out the UK’s future participation in a long-term customs union with the EU.
The Bill will now go on to a public bill committee, which is expected to start on 23 January and must conclude by 1 February. The committee invites interested parties to submit written evidence on the Bill by 1 February.
Before the second reading debate, the chair of the Treasury select committee, Nicky Morgan, had promised to launch an ‘urgent investigation’ on concerns of business groups that the Bill will abolish the EU concept of acquisition VAT for business-to-business intra-EU movements, meaning import VAT will be charged up-front on all imports from outside the UK.
The government acknowledged in the November 2017 Budget that businesses currently benefit from postponed accounting for VAT when importing goods from the EU, noting: ‘the importance of such arrangements to business due to the cash flow advantage they provide. The government will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash flow impacts’.
During the debate, Mrs Morgan said: ‘many small businesses in this country have not had to deal with import VAT, because they have been dealing with imports from the EU, and that finding upfront cash to pay for that would be a real problem for them’.
Financial secretary to the Treasury, Mel Stride, responded with confirmation that the Bill ‘moves us away from acquisition VAT to import VAT’. However, the government did not want: ‘over 100,000 businesses to be disadvantaged in cash terms in the way she describes’, he added, ‘so this is certainly something that we will be looking at closely going forward’. The Bill ‘does not prescribe any particular endpoint in this context’, Mr Stride said, so ‘it will be for the government, after the passage of the Bill, to decide exactly where we wish to end up’.
Steven Porter, partner at Pinsent Masons, commented that: ‘after Brexit if imports from the EU are treated in exactly the same way as imports from countries outside the EU, there will be cashflow disadvantages for retailers and manufacturers, which could flow through into increased prices for UK consumers’.
In December, Nicky Morgan wrote to the Chancellor, Philip Hammond, on matters including whether the government has decided to rule out the UK participating in a customs union with the EU following Brexit. The chancellor offered no such explicit confirmation in his reply. Commenting on this correspondence, Morgan said: ‘It was widely thought that being in a long-term customs union with the EU had been ruled out by the government. But the chancellor’s letter confirms that this is not the case’. Mrs Morgan called on the government to reach agreement on these questions ‘as a matter of urgency’.
Mel Stride attempted to cast some light on the matter in the second reading debate, clarifying clause 31 of the Bill, which, he said: ‘makes provision for this country to enter into a customs union with another territory. That territory could be the existing customs union of the European Union after we have left the European Union, or it could be another territory separate from it’.
The Department for International Trade has published a briefing paper, ‘Preparing for a UK trade policy: a guide to trade legislation’, covering both the Trade Bill and the Taxation (Cross-border Trade) Bill (see http://bit.ly/2CWyEq4). In the section on trade-related tax measures, the paper says the Taxation (Cross-border Trade) Bill will ensure the UK can:
Other measures to replace existing powers and schemes in EU law include:
The Taxation (Cross-border Trade) Bill passed its second reading on 8 January 2018. The financial secretary to the Treasury confirmed the government will look at ways to minimise adverse cash-flow effects on small businesses of the move away from EU acquisition VAT to import VAT. In an exchange of correspondence with the chair of the Treasury select committee, the chancellor has declined to rule out the UK’s future participation in a long-term customs union with the EU.
The Bill will now go on to a public bill committee, which is expected to start on 23 January and must conclude by 1 February. The committee invites interested parties to submit written evidence on the Bill by 1 February.
Before the second reading debate, the chair of the Treasury select committee, Nicky Morgan, had promised to launch an ‘urgent investigation’ on concerns of business groups that the Bill will abolish the EU concept of acquisition VAT for business-to-business intra-EU movements, meaning import VAT will be charged up-front on all imports from outside the UK.
The government acknowledged in the November 2017 Budget that businesses currently benefit from postponed accounting for VAT when importing goods from the EU, noting: ‘the importance of such arrangements to business due to the cash flow advantage they provide. The government will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash flow impacts’.
During the debate, Mrs Morgan said: ‘many small businesses in this country have not had to deal with import VAT, because they have been dealing with imports from the EU, and that finding upfront cash to pay for that would be a real problem for them’.
Financial secretary to the Treasury, Mel Stride, responded with confirmation that the Bill ‘moves us away from acquisition VAT to import VAT’. However, the government did not want: ‘over 100,000 businesses to be disadvantaged in cash terms in the way she describes’, he added, ‘so this is certainly something that we will be looking at closely going forward’. The Bill ‘does not prescribe any particular endpoint in this context’, Mr Stride said, so ‘it will be for the government, after the passage of the Bill, to decide exactly where we wish to end up’.
Steven Porter, partner at Pinsent Masons, commented that: ‘after Brexit if imports from the EU are treated in exactly the same way as imports from countries outside the EU, there will be cashflow disadvantages for retailers and manufacturers, which could flow through into increased prices for UK consumers’.
In December, Nicky Morgan wrote to the Chancellor, Philip Hammond, on matters including whether the government has decided to rule out the UK participating in a customs union with the EU following Brexit. The chancellor offered no such explicit confirmation in his reply. Commenting on this correspondence, Morgan said: ‘It was widely thought that being in a long-term customs union with the EU had been ruled out by the government. But the chancellor’s letter confirms that this is not the case’. Mrs Morgan called on the government to reach agreement on these questions ‘as a matter of urgency’.
Mel Stride attempted to cast some light on the matter in the second reading debate, clarifying clause 31 of the Bill, which, he said: ‘makes provision for this country to enter into a customs union with another territory. That territory could be the existing customs union of the European Union after we have left the European Union, or it could be another territory separate from it’.
The Department for International Trade has published a briefing paper, ‘Preparing for a UK trade policy: a guide to trade legislation’, covering both the Trade Bill and the Taxation (Cross-border Trade) Bill (see http://bit.ly/2CWyEq4). In the section on trade-related tax measures, the paper says the Taxation (Cross-border Trade) Bill will ensure the UK can:
Other measures to replace existing powers and schemes in EU law include:
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