U.K. Tax Chiefs Set Seven-Month Deadline for Brexit Customs Plan

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By Ben Stupples

The U.K. needs to reach a decision with the European Union on its future customs arrangement with the trading bloc within seven months, according to senior tax authority officials.

The government must decide on a post-Brexit customs accord with the EU “between Christmas and the end of the current financial year” on March 31, 2018, Jon Thompson, chief executive of Her Majesty’s Revenue and Customs, said in a Sept. 14 Treasury select committee evidence session.

Ahead of the U.K.'s departure from the EU in 2019, HMRC would need that time frame “to firm up our resource planning and begin recruitment” in the event of customs controls in operation between the U.K. and the EU, Jim Harra, the tax authority’s customer strategy director general, added in the same session.

Political Deadlock in Brussels

The comments come amid a political deadlock on the U.K.'s and EU’s future customs operations.

Last month, the U.K. published a paper on possible post-Brexit customs arrangements, outlining two options to “avoid a cliff-edge” for all businesses and individuals. On the same day, however, the European Parliament’s lead coordinator for Brexit negotiations branded the plans a “fantasy.”

As an EU member, the U.K. is currently part of the EU’s customs union. Under this arrangement, the bloc’s member states don’t impose taxes on imports or exports exchanged between each other.

In the Aug. 15 paper, the U.K. proposed a streamlined customs arrangement with the EU, simplifying requirements and aiming to continue some existing terms of the bloc’s free-trade customs union.

In a more bold option, the government’s paper also proposes a new customs partnership with the EU that would remove any customs border between the U.K. and the bloc.

“This is of course unprecedented as an approach and could be challenging to implement and we will look to explore the principles of this with business and the EU,” the paper said of the no-border options. “Our ultimate customs arrangement will depend on our negotiations with the EU.”

Post-Brexit Interim Period

The U.K.’s customs paper suggested an interim period once the country has left the EU, providing the necessary time for both parties to implement any negotiated long-term solutions.

In the Sept. 14 evidence session, the first of the new Treasury select committee following the U.K.’s June 8 general election, HMRC’s Harra called for a final resolution over a possible interim period.

“What we would like to see sooner, rather than later, is a decision on the interim period,” he said. “An early decision on that would help HMRC and U.K. traders, and we think EU member states and their traders as well, because otherwise people are going to have to plan for a contingency.”

New Committee Line-Up

Currently chaired by former education secretary Nicky Morgan, the Treasury select committee scrutinizes work by HMRC, the Financial Conduct Authority, the Bank of England, and the Treasury.

On Sept. 12, the committee announced its latest line-up after Prime Minister Theresa May’s call for a snap election forced the break-up of the previous representatives from the 2015-17 parliament.

In a Sept. 14 news release, meanwhile, the committee outlined the scope of its future work, pledging to keep inquiring about the U.K.’s transitional arrangements once it leaves the EU.

The committee “has a broad outline for a future programme of work,” Morgan, a former Treasury financial secretary, said in a statement.

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

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

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