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Trade Bill - Committee (4th Day)

Part of the debate – in the House of Lords at 7:00 pm on 4th February 2019.

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Photo of Lord Bates Lord Bates The Minister of State, Department for International Development 7:00 pm, 4th February 2019

I will make some progress, but I will come back to that point—when inspiration arrives.

No UK Government, regardless of their political leanings, could ever accept such a carving up of the United Kingdom—I am referring here of course to the division between Northern Ireland and the Republic of Ireland. Indeed, on 15 October, in another place, the Prime Minister said:

“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom, and I am sure that the whole House shares the Government’s view on this. Indeed, the House of Commons set out its view when agreeing unanimously to section 55 in … the Taxation (Cross-border Trade) Act 2018 on a single United Kingdom customs territory, which states: ‘It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain.’ So the message is clear not just from this Government but from the whole House”.—[Official Report, Commons, 15/10/18; col. 410.]

Turning to Amendment 80—before I come to some of the points raised during the debate—the Government’s position is that they will not seek to be in a customs union with the EU. We have debated this issue in this House and in the other place throughout the passage of this Bill—leaving aside the very clear response that is on its way to the noble Lord; he should be prepared for that. As has already been highlighted to the House, at Report stage in the Commons, MPs rejected an amendment seeking to keep the UK in a customs union with the EU.

On the specific points relating to import VAT, it is clear that the Government are highly cognisant of the concerns raised. I will deal with that point now because the noble Lord asked some very good questions on VAT treatment, and it is good to have an opportunity to put the position on the record. Goods from third countries are treated as imports, with VAT due accounted for on import or by the 15th of the following month as duty of customs. This means that, unlike acquisitions, there is a cash-flow impact because traders have to pay the import VAT and potentially recover it later when they submit their VAT returns. It also means that there needs to be an option to pay import VAT on the border, as not all businesses have the necessary guarantee to defer payment until the following month. Generally, import VAT is paid sooner on goods from non-EU countries than on goods from EU countries. This provides a cash-flow benefit to companies importing goods from the EU compared to businesses that import from non-EU countries. Without an UK-EU agreement to retain this treatment, goods entering the UK from the EU would be treated as imports and would be subject to the same rules as businesses moving goods from non-EU countries. This would mean businesses paying VAT on imports from the EU sooner, affecting their cash flow. The Government published a series of technical notices in August 2018 to help businesses prepare for the unlikely event of a no-deal scenario. The VAT technical notice, “VAT for businesses if there’s no Brexit deal”, announced that the Government will introduce postponed accounting for import VAT on goods brought into the UK.

The noble Lord, Lord Stevenson, asked why we accepted Section 54—originally New Clause 36—of the Taxation (Cross-border Trade) Act 2018. The Government did so because it was consistent with our position. It requires the Government to negotiate a reciprocal arrangement for the collection and remittance of VAT, customs and excise duties. The Government have been clear that both the UK and EU should agree a mechanism for the remittance of relevant revenue. The Government set out in their July White Paper that they propose a revenue formula that takes into account goods destined for the UK entering via the EU and goods destined for the EU entering via the UK.

The noble Lord, Lord Purvis, asked whether the customs territory is a customs union under GATT, and he deserves a full answer to his detailed question, so I commit to writing to him. That should be very clear to the noble Lord and all Members of the House—well worth waiting for.