The Taxation (Cross-border Trade) Bill is designed to allow the UK to set and collect customs duty on goods imported into the country, including preferential or additional duties where appropriate. It will also underpin the UK's standalone cross border VAT and excise legislation once EU legislation no longer applies.
The precise nature of the UK's future customs relationship with the EU will depend on the outcome of negotiations between the UK and EU. For that reason, the bill is designed to allow the government to implement the outcome of those negotiations, including any implementation period, by way of secondary legislation.
Tax expert Steven Porter of Pinsent Masons, the law firm behind Out-Law.com, said that these elements of the bill would be "controversial".
"The bill essentially aims to cover all bases: a 'no deal', with the UK crashing out of the EU, and a range of 'deal' scenarios. In order to legislate for outcomes that are yet to be negotiated, the bill gives the government wide-ranging powers to make future changes by way of statutory instrument."
"As the bulk of our customs duty legislation is set out in the Union Customers Code, which is directly applicable in the UK while we are part of the EU, we have no domestic legislation setting out the whole customs regime so the bill needs to do this. Fortunately for businesses, the government intends the post-Brexit UK customs regime to operate in a similar way to the current EU regime. However, depending on what is agreed, there is likely to be increased bureaucracy in relation to imports from and exports to the EU," he said.
"Most of the legislation needed to operate the UK's domestic VAT regime post-Brexit is already contained in UK legislation. The bill will also impose VAT on goods imported from the EU, which are currently not subject to VAT," he said.
The legislation builds on proposals set out in a government white paper on the UK's future customs, VAT and excise regime, published last month. As an EU member state, the UK is currently part of the EU customs union and its customs laws stem from EU legislation. The customs union means that goods moving between the UK and other EU countries are not subject to routine customs controls, duty or quotas, among other things.
The bill, therefore, would allow the government to charge and vary customs duty on goods; to specify which goods are subject to what duty; and to set preferential or additional duties in certain circumstances. This may, for example, include tariffs on specific industries in order to create "necessary and proportionate safeguards against unfair trade"; or preferential rates on goods from developing countries.
The government's intention is that its future trade policy delivers the "greatest economic advantage to the UK", while ensuring that trade between the UK and EU is as frictionless as possible and avoiding a 'hard border' between Ireland and Northern Ireland. A separate Trade Bill, published on 7 November, contains provisions allowing a post-Brexit UK to establish its own international trade policy.