Brexit Bulletin, 2 October 2020

Oct 02, 2020

In a serious turn of events, the European Commission has officially issued its first notice of legal action to the UK. With the UK’s failure to amend the Internal Market Bill after the EU’s request to do so, the UK authorities now have until the end of the month to respond to this legal action. Read today’s bulletin to find out more details. We also bring updates on the UK’s Financial Conduct Authority’s new Brexit transition rules for the finance sector. Also, read about the EU’s new Customs Action Plan to combat fraud. 


European Commission takes legal action against UK over Internal Market Bill

In response to the UK’s inaction to overturn conflicting aspects of the controversial Internal Market Bill, the European Commission has issued a letter notifying the UK of the start of formal legal action.

Why has the EU taken legal action?

As stated by Commission Vice President Maroš Šefčovič, the timely and full implementation of the Withdrawal Agreement, including the Protocol on Ireland / Northern Ireland is a legal obligation. The UK were given until the end of September to amend the contentious aspects of the Bill, however due to failure to do so, the UK has breached its obligation to act in good faith, as set out in Article 5 of the Withdrawal Agreement.

What’s next?

The UK has one month to reply to the EU’s letter. The issue of this letter marks the beginning of the EU’s formal infringement process against the UK.

Additionally, the UK’s controversial Internal Market Bill easily cleared its final hurdle in the House of Commons earlier this week, where it passed by 340 votes to 256. The Bill is now at its second reading at the UK’s House of Lords, which has the power to block the legislation by amending it and sending it back to the Commons.


UK’s Financial Conduct Authority sets out rules for the end of Brexit transition period

The Financial Conduct Authority (FCA) based in the UK has outlined  some Brexit transition rules for the financial sector. Firms that are not already in line with the changes will need to show that they have made efforts to comply by 31 December to avoid penalties, as stated by the FCA.

The FCA have also released details on how they intend to apply Temporary Transitional Power (TTP) rules following the end of the transition period, allowing firms to transition to the new regime. Where applicable, these rules will mean that firms and other regulated persons can continue to comply with their existing requirements for a limited period of time.

After the end of the transition period, onshored* legislation will apply. The FCA expects firms to use the duration of the TTP to prepare for full compliance with changes to UK regulatory obligations by 31 March 2022. Key changes are foreseen in areas such as These include transaction reporting, securitisation, some uses of credit ratings and security aspects of payment services.

*Onshoring is the process of amending legislation and regulatory requirements so that they work in a UK-only context, including EU legislation that will form part of UK law by virtue of the European Union (Withdrawal) Act 2018.



New Customs Action Plan set to make customs union smarter, says European Commission

In the latest developments on the customs front, the European Commission has launched its new Customs Union Action Plan, set out with 17 actions to make  EU customs smarter, more innovative and more efficient. The Commission says that this action is in response to reported fraud linked to customs duties and VAT as well as the smuggling of illicit goods into the EU. The Commission is set to implement some of the first steps under this initiative as early as October 2020.

The revamp actions in the Customs Action Plan comprise of four key areas:

  1. Risk management
  2. Managing e-commerce
  3. Promotion of compliance
  4. Customs authorities acting as one

Some key initiatives under these headings include setting up a new analytics hub, new customs reporting requirements for platforms, a single window environment for customs, modernised customs equipment, Union Customs Code evaluation, and international customs cooperation.


Brexit Bites

  • The UK government has made available a £200 million Port Infrastructure Fund to support ports in building new facilities.
  • Readers can still register for Revenue’s upcoming series of live streamed Brexit information sessions on customs and movement of goods taking place on 5 and 6 October 2020.
  • Sign up for LEO Workshops: Prepare Your Business for Brexit Customs 



For all Brexit updates, visit our Brexit webpage.