Brexit bites, 27 November 2017

Nov 27, 2017

Brexit negotiations are beginning to heat up with the European Council setting a 4 December deadline to make progress on the divorce bill and the Northern Ireland border.  In other developments, the UK has published its Customs bill which provides for a range of possible outcomes from the Brexit talks including a no deal scenario and £3 billion has been earmarked in the UK’s Autumn Budget to prepare for Brexit eventualities.

4 December Deadline

The European Council has given the UK until 4 December to put worthwhile proposals on the table in terms of the financial settlement, the border and citizens’ rights so that the EU can agree that talks can move on to trade.  On the border issue, the UK must tell Ireland and the other EU member states how a hard border between Northern Ireland and the Republic will be avoided and how the border will be controlled when the UK leaves the EU.  

Taoiseach Leo Varadkar has said that he wants a written guarantee from the UK that there will be no hard border as the Irish government believes that this can only be achieved by keeping Northern Ireland inside the Customs Union and Single Market.  The UK has stated that while it doesn’t want a hard border, the UK in its entirety will leave the Customs Union and the Single Market. UK Secretary of State for International Trade, Liam Fox has reportedly said that a final decision on the Northern Ireland border cannot be made until a trade deal has been agreed.  

This position is not entirely out of line with the European mandate given that the EU only wants “sufficient progress” to be made before the next European Council Summit in mid-December.  In some ways Ireland is seen as an obstacle to this advancement as it can use its veto to stop talks moving onto trade negotiations.  

Foreign Affairs Minister Simon Coveney dismissed UKIP’s claims that Ireland is threatening the UK with its stance saying "Ireland is not threatening anybody, least of all a friend, but we remain resolute in our insistence on a sensible way through Brexit that protects Ireland."

New Customs Bill published

The UK government has published the Taxation (Cross-border Trade) Bill, previously referred to as the Customs Bill, which provides for the implementation of a customs regime when the UK leaves the EU.  The Bill allows for a range of outcomes from the Brexit negotiations and also includes provisions should the UK leave the EU without a deal.   At the moment the UK is part of the EU Customs Union which means that goods moving between the UK and other EU member states are not subject to customs checks, duties or quotas.  This may change on Brexit.

A new standalone Customs regime is provided for in the Bill and is based largely on EU law. The government intends that the UK’s current customs regime will continue as normal when the UK departs the EU but notes that for traders who only trade with the EU, they may have a requirement to make customs declarations depending on the outcome of the talks.

The legislation follows on from the proposals set out in a white paper on the UK’s future customs, VAT and excise regime.  The Bill allows the UK to charge varying levels of custom duties on goods as well as specifying which goods attract duties. The UK can also set preferential or additional duties as it sees fit which the UK may want to do in order to safeguard against unfair trading practices.

This Bill includes a proposal to amend the existing VAT legislation to state that import VAT will be charged on all business to business imports from outside the UK. Currently intra-EU acquisitions are zero rated for VAT purposes and the reverse charge mechanism applies. 

The Bill was introduced to the House of Commons on 20 November and will now go through the usual phases of scrutiny.

Brexit shorts

  • £3 billion has been put aside in UK Budget for all Brexit eventualities
  • “Acute anxiety” exist in the border regions over Brexit, Queens University Belfast report finds
  • Dublin narrowly loses out to Paris in its bid to host the European Banking Authority
  • UK banks will lose EU passporting rights on Brexit, says EU

Read all of our Brexit updates on the dedicated Brexit section of our website.