The UK government has published a position paper setting out its view on the Future Customs Arrangements it would like in place following Brexit.
This is one of several papers being issued which set out the Government’s desired outcome for Brexit across several areas.
This paper notes that in 2016, UK imports from and exports to the EU totalled £553bn via over 200,000 businesses. However, that total is likely to be bigger as it only considers VAT registered businesses.
Given the size and value of EU trade to the UK, the position paper sets out that the UK envisages two new scenarios post Brexit:
- A streamlined customs arrangement where as many as possible of the existing arrangements are kept in place and where required, new negotiated and unilateral facilitations are agreed on to reduce and remove barriers to trade; or
- A new customs partnership with the EU is agreed on, that removes the need for UK-EU borders because the UK’s approach to and requirements for imports would mirror that of the EU when goods have a final destination there.
Whilst the Government’s stated intention is that the UK will formally leave the Customs Union in March 2019, the UK Government proposes that the UK should have close alignment to the Customs union for a time-limited period (maybe 3 years). The purpose of this is to avoid a cliff edge scenario and give businesses and the Government time to negotiate and bed in any new processes that might be required post Brexit.
However, the paper also notes that neither of the two favoured outcomes may be achievable nor the temporary membership model be allowed. In addition, there is very limited UK legislation in relation to Customs law as it uses the Union Customs Code, which is EU legislation. Hence in Autumn 2017, a new Customs Bill will be published giving the UK Government powers to operate standalone customs, VAT and excise systems. It is proposed that this will be based on the Union Customs Code.
At this stage, the paper is what it says – confirmation on the Government’s desired position post Brexit in 2019. However, the fact that plans for a cliff edge eventuality are being made with the publication of a Customs Bill clearly outlines that there are still no certainties being offered. The final position will very much depend on how negotiations with the EU go and at this stage, that cannot be envisaged.
Given the continuing uncertainty, our advice to businesses remains to start or continue undertaking Brexit preparations such as the Brexit Health Check set out here. Decisions and resolutions on the future of the UK and EU’s VAT and Customs landscape will likely start to come thick and fast from Autumn 2017. The businesses which have already prepared will be able to understand the implications of these and make informed decisions promptly. This will enable the smoothest as possible transition to be made from the existing arrangements to whatever will be in place post Brexit.