U.K. Tax Agency Asked to Explain Stance on Government Brexit Plans

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By Ben Stupples

The U.K. tax authority has been asked to explain its position on the government’s post-Brexit tax plans following claims that officials have described a cross-border trade provision as unworkable.

“HMRC officials are apparently criticising the Prime Minister’s plan for a customs partnership with the EU,” Nicky Morgan, chair of the U.K. Treasury select committee, said in a May 14 statement. “The Treasury Committee wants HMRC to explain the grounds on which these criticisms are based.”

Led by Morgan, a former education secretary, the Treasury select committee is a panel of U.K. lawmakers that scrutinizes the work of the U.K. Treasury and Her Majesty’s Revenue and Customs.

Morgan’s statement marks the second time in the past four weeks that she has questioned HMRC’s conduct. In a letter to HMRC’s chief executive, released April 25, she queried its efforts to collaborate with other countries after claims it failed to assist in a French probe of a London-based telecom giant.

‘Incredibly Complicated’ Plans

The latest focus on HMRC centers on its response to the U.K. government’s tax plans for cross-border trade once the country leaves the European Union. The U.K. doesn’t have to impose cross-border taxes, such as import and export duties, on trade between member nations while it’s in the EU. The levies will apply, though, once the U.K. leaves the EU following a transition period that ends by 2021.

The government is mulling two options for its post-Brexit cross-border tax system. The first involves a customs partnership with the European Union, a move that would sustain free trade with the bloc but result in the U.K. collecting tariffs for the bloc. The second option, meanwhile, would enforce a hard U.K. border but rely on technology and existing systems to reduce disruption for businesses.

“The Government’s two customs proposals are still on the table and work is being done as a priority on these,” an HMRC spokesman said in a May 14 email.

To contact the reporter on this story: Ben Stupples in London at bstupples@bloombergtax.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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