VAT (Place of Supply of Services) (Supplies of Electronic, Telecommunications and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 Finance Act 2011, Schedule 23 (Data-Gathering Powers) (Amendment) (EU Exit) Regulations 2019 Customs (Records) (EU Exit) Regulations 2019

Alison Thewliss Excerpts

Tuesday 14th May 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Sharma.

It seems that we are back in the land that time forgot—the land of Brexit statutory instruments, which is in a different time zone altogether if the Committee Room clock is to be believed. It feels as though the SIs we are looking at today were the Brexit SIs that the Government forgot. If they were so vital why are we dealing with them now rather than before the Government cancelled their original date for Brexit back at the end of the March? These SIs are important. They deal with the functioning of many processes that businesses find incredibly important, and overshadowing all that is what exactly the future regime envisaged by the Government looks like, and how businesses can prepare themselves and adapt for it.

As hon. Members have laid out, the first SI, on VAT and the supply of services, changes the circumstances with the mini one-stop shops—the MOSS regime. As this was introduced in January 2019 and we are now getting rid of it, we seem to be in a veritable customs VAT hokey-cokey. Electronic, telecommunication and digital services are important to the economy. I was at the ScotlandIS awards on Friday night; there are many companies working in the digital sphere doing incredibly innovative and exciting things. They need to have some degree of certainty that they will be able to do their business from Scotland—from Glasgow—and the rest of the UK in a couple of months’ time. This really gives us very little clarity.

The mini one-stop shops have gone about the business of simplifying the rules for businesses, but businesses want to continue to supply digital services. They will perhaps need to re-register in the different member states of the EU and comply with those regimes, in circumstances where, as the hon. Member for Stalybridge and Hyde said, there has been no consultation and no impact assessment.

We do not have any real idea, as Members of Parliament, how this will affect businesses and what it will cost. We do know that there is a risk of losing 47,000 jobs in Scotland with the loss of the single market. That is a huge number of jobs, and they will probably be in this type of high-skills sector. Many of the people involved in these sectors are bright young things who can travel and are very flexible. If they find that their business will be located on the other side of the English channel and carry on as now, they will most likely consider that rather than staying, which will be to the detriment of us all. I want to hear from the Minister what the impact will look like and who the Government have consulted.

I will now turn to the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019. A no-deal Brexit—Brexit in general—was supposed to be about ripping up red tape and removing paperwork to make things simple, but this appears to be another example of how, if we end up with a no-deal Brexit, we will have more paperwork and things being far more complicated. I note that it says that overseas suppliers are liable for the import VAT on

“any consignment of goods sent into the UK in a ‘postal packet’ if the value of goods it contains is £135 or less. Overseas suppliers may discharge the liability by…registering with HMRC and accounting for import VAT…or…paying the import VAT due to the postal operator”.

All those things require additional procedures and processes. They require the people transacting to know that they have to do this and that this is an obligation on them. I would be interested to see what the regime looks like if they do not comply with what is being asked here. Will there be fines or some manner of sanction imposed on people who overlook this new process? People are being asked to do something different in the circumstances of no deal.

As the explanatory note points out,

“The definition of a ‘postal operator’ is wide—it covers any person who carries parcels from one place to another or who receives, collects, sorts or delivers parcels.”

That could be quite wide and quite significant. Some people feel that they have not been captured within this definition and therefore that they do not have to register. It would be good to get a lot more detail on when the Minister intends to bring these subsequent regulations to the House, how they will be scrutinised when they come to the House, and what consultation he intends to do to ensure that people who are affected by these regulations actually have some say on what they contain.

Yet again, there has been no formal consultation regarding this SI and it is not clear from what is set out here exactly which stakeholders the Government have engaged with. Although it says that stakeholders have been engaged with, there is no further detail on that. It is difficult for us to see the extent to which that has already been done.

The third instrument—the Customs (Records) (EU Exit) Regulations 2019—is again a replication of current EU law, but, as it is regarding many of these SIs, it is unclear what the future will look like. It is unclear whether anything will change, when further notice will come back to the House for us to decide and whether it will come back to a Committee like this. Given the uncertainty around deal or no deal, we do not know exactly when that might come either.

The Government are saying today that they want to get their withdrawal agreement done and dusted by the summer recess. Well, good for them if they can. Who knows if they will? We need to know when the Government will introduce these measures and that it will be done in a reasonable timescale, so that full consultation can be conducted and that those who need to know these things can do so.

Does the Minister have any figures on familiarisation costs, which were very much part of the financial services SIs and impact assessments, but do not seem to be, as far as I have seen, part of these Sis? Will new processes be put in place? How long will firms have to become familiar with those processes and understand them? How far ahead will the Government notify them of any new processes that they may have to follow?

The Minister said that data will have to be retained for a suitable period—perhaps three years—but again, people need to plan for and understand that process. They need more certainty. Just saying in this Committee, “A suitable period of about three years is what we intend,” is different from saying when the regulations will be introduced.

Finally, how will the Government notify all the organisations, companies and individuals who will be affected by the proposed processes? We have heard a bit about the issue of people having to register for settled status and there has been advertising about that, but if this is going to be a serious issue for businesses in the event of no deal, what will the Government’s process be for getting in touch with them? Is there a communications plan, should it be needed, if we end up without a deal? Hopefully the Minister will be able to answer some of those concerns.

[Mel Stride]

I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their contributions. I will endeavour to go through their points.

The hon. Member for Stalybridge and Hyde made a general overarching point about the uncertainty of Brexit. I agree with him about that, which is why the Government are working so hard, including through conversations with his Front Bench, to secure a negotiated arrangement with the European Union whereby we have an orderly exit. The measures are being brought in only on the basis that, in the unlikely event of day one no deal, we will be able to switch them on by way of an appointed day order.

An important point for the Committee is that we are not rushing these measures in immediately; we have time to see how the negotiations conclude and to bring the measures into effect at the appropriate moment. That also gives us some time to address the specific point about how we propose to make sure that those affected by the measures are aware of them. Of course, we have consulted extensively on these matters with businesses across the country that are involved in imports and exports, and there is an extensive amount of information on that area on gov.uk. There was also an impact assessment that covered, among others, the two instruments that relate specifically to VAT measures, which concluded that the impact would be relatively modest.

The hon. Gentleman is also concerned about the fact that we are using secondary legislation for the measures, but we published the statutory instruments some time ago. I think I am right in saying that the instrument relating to VAT MOSS was published in January, and the other two have also been available for hon. Members to consider for a reasonable amount of time. Of course, they are also affirmative instruments, rather than negative instruments, given that they make amendments to primary legislation.

I was asked specifically why the instruments were being moved today, rather than at any other point. It is a case of making sure that we put them in place so we can switch them on through an appointed day order in the event that we come out without a deal. Of course, in theory at least, we have until the end of October to conclude our arrangements with the European Union.

The hon. Gentleman spoke about the importance, as he saw it, of regulatory alignment with the EU in the context of VAT, on which I agree with him. We have always made it clear that it is our intention and desire for VAT and other tax issues, and indeed customs measures more generally, between us and the European Union to be as closely aligned as possible, so we have a period of stability as we go forward in whatever new arrangement we end up in.

The hon. Gentleman also asked about what would happen to the UK businesses that have benefited from what I accept are considerable easements and simplifications related to the operation of VAT MOSS if we leave without a deal. We have always been clear that either they would have to register with the individual member states with whom they were transacting VAT-applicable business and digital services, or they could afford themselves of the benefits of the non-Union VAT MOSS arrangements available to those outside the European Union.

The hon. Members for Stalybridge and Hyde and for Glasgow Central both made points about the data that will need to be collected under the parcels regulations. I assure the Committee that, as I set out in my opening remarks, there will be no additional burden on business. The focus is strictly on obtaining data that is relevant to parcel collections.

[Alison Thewliss]

The Minister says that there is no additional burden to business, but is he not asking businesses to do something that they were not doing before?

[Mel Stride]

The additional burden, such as it might be, would be registering and being prepared to provide information that is already being collected. In their day-to-day transactions, those businesses already collect a large amount of information, for example on the flow of parcels, where they come from and their value. As the hon. Lady will know, for parcels with a value below £135 the responsibility for accounting for the VAT will transfer from the UK to the sender in one of the EU27 states. To rephrase my point, the additional administrative burden will be proportionate and relatively slight—that is probably a better way to describe it.

The hon. Lady asked about the penalty regime with respect to the responsibilities and obligations that will materialise under the regulations on customs transactions. The answer is that there will be no change to the regime for the businesses concerned. She spoke about consultation, which I think I have dealt with. She also observed that the changes under the VAT MOSS order relate to changes that happened as recently as January 2019. We could not have foreseen those changes, and there are no changes to primary UK legislation. As I set out in my opening speech, it makes sense to rid ourselves of that superfluous legislation, for the reasons that I gave about the potential risk that it could be used for tax avoidance purposes.

The hon. Lady mentioned the three-year period for which customs data will have to be held. Under the current European Union arrangements, however, the data is retained for four years, so the new system will be no more onerous.

Question put and agreed to.

Resolved,

That the Committee has considered the Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication a Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 (S.I. 2019, No. 404).

Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 397).—(Mel Stride.)

Customs (Records) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the Customs (Records) (EU Exit) Regulations 2019 (S.I. 2019, No. 113).—(Mel Stride.)