Tax experts 'concerned' by post-Brexit customs law plans

The Chartered Institute of Taxation (CIOT), which represents UK tax professionals, has instead recommended that the government take the same approach to post-Brexit customs law as to EU law more broadly. It has called on the government to adopt the EU's Union Customs Code at the point of departure, subject to appropriate amendments, and to use this as the starting point for post-Brexit trade between the UK and EU.

The Taxation (Cross-border Trade) Bill, also known as the Customs Bill, is currently being considered by the UK parliament. Once passed, the bill would allow the UK to set and collect customs duty on goods imported into the country, at the same time as underpinning 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.

The CIOT believes that this approach is "at odds" with the government's general position of ensuring that the body of EU law applies in the UK the day after Brexit in the same way as it did before, as established by the EU (Withdrawal) Bill. It is also concerned that the draft bill gives ministers the "unprecedented power" to create new customs and tax legislation, with minimal parliamentary oversight and with no clear deadline, according to a submission to the ministers and MPs who are currently reviewing the bill.

"The powers being created by the bill and delegated to ministers are extraordinary and of deep concern to us," said Alan McLintock, chair of the CIOT's subcommittee on indirect taxes.

"It is worth emphasising that the powers created by the bill are permanent. In decades to come, when Brexit is a distant memory, ministers will retain the powers to rewrite virtually every aspect of the UK's customs regime without any need for recourse to primary legislation. It is hard to justify this. The main pillars of all the other elements of the UK tax system require an act of parliament to change them. Why not customs?" he said.

The CIOT believes that HMRC intends to completely redraft the Union Customs Code to create a UK-specific system at the point of Brexit, according to its submission. This approach is likely to create confusion, as the use of different phrases and words for existing concepts "will immediately open the door to different interpretations and lessen the reliance taxpayers can place on existing customs case law", McLintock said.

"This has happened in the past in other areas when draftsmen have tried to restate in different language provisions which it is their policy intention to adopt," he said.

"Given the time constraints on agreeing a Brexit deal with the EU and the need to give businesses greater certainty, it would be better for the government to incorporate the existing EU Union Customs Code into UK law with specific, clearly identified changes being made where necessary, rather than attempt the feat of creating a completely different style of legislation, intended to say much the same thing, from scratch," he said.

The CIOT also used its submission to highlight the combined impact for businesses of Brexit and HMRC's 'Making Tax Digital' (MTD) project, both of which will come into force simultaneously in spring 2019. The government should consider relaxing the MTD timetable, as well as take a 'light touch' approach to imposing new customs requirements on small businesses, it said.

The submission also backs calls for a post-Brexit transitional period "as close as possible to the status quo" to enable businesses to adjust to the volume and complexity of Brexit-related tax changes, as well as "substantial extra resources" for HMRC.

"In trying to keep open all options, depending upon the outcome of the Brexit negotiations, this bill does nothing to reduce the uncertainties for business of the post-Brexit customs regime," said tax expert Steven Porter of Pinsent Masons, the law firm behind Out-Law.com.

"It is very worrying that the bill effectively gives the government wide-ranging powers, with no longstop date, to rewrite the UK's customs rules without proper parliamentary scrutiny," he said.