Taxation (Cross-border Trade) Bill (First sitting)

Debate between Chris Davies and Kirsty Blackman

Tuesday 23rd January 2018 Public Bill Committees

[Chris Davies]

Q Do you not think there is enough flexibility in the Bill already?

William Bain: It is a very flexible Bill—it has extensive powers to make delegated legislation. It does throw up some other issues that the BRC would like to see resolved during this process. For example, to get as free a flow of goods as possible, we not only need a deal with the EU on customs arrangements, we also need it on things such as transit, security, haulage and particularly VAT.

One of our concerns is that the way the Bill is drafted at the moment throws up some issues about doing business in the future. For example, companies may have to register in every EU member state in which they provide services and in many member states in which they take goods to and from the UK. That is something that we would strongly urge the Committee to look at as the Bill proceeds.

Peter MacSwiney: I will stick to the system issue, if you like. I echo what Anastassia has said. The phrase “free circulation” is still in there. I do not see how that applies. Origins should be the criteria. You said it is a very flexible Bill—it is. Our members have some concerns that it allows HMRC to make it up as it goes along. That is a worry.

I am also concerned about some of the references to electronic systems and to things being delivered by a customs information paper or a public notice. At Heathrow, for instance, public notice 216 applies, which I think was written in the mid ’80s. We have been trying to rewrite it for the last 10 years probably. It suddenly popped up last year having been rewritten with no consultation and did not show any significant changes.

I have a real concern about who will be responsible for determining day-to-day processes such as the presentation of goods, which the Bill mentions—what is that? It cannot be the physical presentation in the post-Brexit world, because there will be too much of it, so the inventory systems have the concept of presentation against an electronic record. Those things really need to be thought out.

[Kirsty Blackman (Aberdeen North) (SNP)]

Q Around the VAT issue, do you have concerns about moving from acquisition to import VAT? What do you think could be put in place to mitigate the issues that you see coming?

William Bain: Yes, that is a huge concern because companies will have a big cash flow hit. The movement of goods within the European Union has been treated as VAT-free up to now. If the UK is treated as a third country afterwards, companies ostensibly will face an up-front cash payment. There are policies—domestic and in terms of the negotiations—that could mitigate that. The Government could introduce a deferment scheme, as is the case in Spain. They could look at other domestic policies to tackle it. More fundamentally, they could look at a form of self-assessment for VAT, which would obviate the need for up-front payments.

Some international solutions could be looked at. As I pointed out earlier, whatever happens domestically, UK companies will still face the burden of having to register for VAT purposes in each member state where they offer services and in most member states where they provide goods. That requires an international solution such as staying in the EU VAT area—even though that might involve treaty change—the establishment of a new common VAT area, or some other strong VAT co-operation. The domestic element and the negotiation element are both required to sort the problem out in the round.

Anastassia Beliakova: VAT and future potential VAT cash flow issues are a serious concern for our members. To echo the points already made, international measures that are not contingent on negotiations could be adopted. Deferment schemes are one. There are already deferment schemes in the UK, but they could be more generous. For instance, they ask businesses to provide bank guarantees, which is yet another cash flow issue for businesses. Some companies can waive it, but only after they have had a clean record of VAT payments for three years, which not all SMEs, for instance, could provide.

Another potential solution is to consider postponed accounting, which in effect is what we already have as members of the EU VAT area. The Government could consider setting out policy that would introduce postponed VAT accounting for imports from all third countries. That would alleviate future concerns in relation to Brexit and simplify existing procedures quite significantly.

Peter MacSwiney: The Joint Customs Consultative Committee has requested a return to postponed accounting; that is not popular with the Treasury, of course.

Taxation (Cross-border Trade) Bill (Second sitting)

Debate between Chris Davies and Kirsty Blackman

Tuesday 23rd January 2018 Public Bill Committees

[Kirsty Blackman]

Q You have all mentioned Dover, but nobody has so far mentioned the ports in Wales, for example, where there is an awful lot of movement between Wales and Ireland. Is that also a concern?

Tim Reardon: It is very much a concern. Dover has by far the biggest number of vehicle units entering and leaving the UK. It is the biggest gateway to the UK— 2.6 million trucks passed across that terminal last year. That compares with, for example, 750,000 between Dublin and Holyhead and Liverpool collectively, or 750,000 across the north channel between Northern Ireland and Great Britain. There are big flows out of the Humber and the Thames, but we tend to use Dover as a shorthand because it is where the problem is. It is the UK’s biggest gateway for roll-on, roll-off freight.

[Chris Davies (Brecon and Radnorshire) (Con)]

Q As it happens, the Welsh Affairs Committee is visiting both Dublin and Holyhead in two weeks’ time, so I shall look forward to chatting to your members about those concerns. For those of us who are slightly uninitiated with the ports’ authorities and the way that the ports work, would one of you give a very brief overview of the differences between accepting a ship coming into this country from the EU and one coming from outside the EU at present, and how long it would take, differentially, time-wise, for a ship from outside the EU and one from inside the EU to dock and go through the procedures?

Tim Reardon: Certainly. There is not a straightforward comparison because, by and large, the types of ships that come from our near neighbours are different from those that come from further afield, but in principle a vessel arriving from one of our European neighbours needs nobody’s permission to come here because its movement is free. The port to which it goes does not need to have approval from anybody to handle it, because it falls within the scope of free movement within the European Union. In theory, the ship could pole up anywhere around the coast and do what it wanted to do. In practice, of course, it goes to a place that has facilities to handle it. Just as the ship is free to come and go as it pleases, so the goods and vehicles on board are not subject to control and can drive straight off the ships ramp, through the terminal and out through the dock gate, unless one of the control agencies has intelligence that leads it to want to make an exceptional intervention in that movement.

By contrast, a vessel coming into the UK from outside the European Union can arrive only at a port that has been approved by Her Majesty’s Revenue and Customs to receive traffic from outside the European Union. It is required to tell Revenue and Customs that it is unloading cargo on to the quay, and to tell it what that cargo is. That cargo is then not permitted to leave the confines of the port until Revenue and Customs has given permission for it to go. You have a contrast between essentially a completely free arrangement, as you would have for any domestic traffic—a ferry between Hampshire and the Isle of Wight, for example. Traffic goes, the ship goes, and there is no intervention on it anywhere unless the police have a reason to stop it. Compare that with an international arrival from outside the European Union where every single stage requires somebody’s permission.