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Brexit White Paper doesn't answer VAT concerns

Published on: 19 July 2018

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In the past week there has been a flurry of activity on what, exactly, the UK Government wants from its future relationship with the EU. Unfortunately, one of the main concerns raised by British Marine, that of the future of VAT paid status on boats and goods after the UK leaves the EU, remains unanswered and unclear.

The publication, last week, of the Government’s White Paper on the future relationship between the UK and the EU was intended to really clarify what the UK Government was seeking from the EU in its withdrawal negotiations and future relationship. And in some ways it did, with many industries and representative bodies, including marine and maritime, welcoming the stated intentions to protect jobs and investment now and in the future, to seek a free trade area for goods and ensure a common rule book to enable frictionless trade between the UK and EU.

However, one of the key issues put forward by British Marine to Government over the past 18 months has been around the future of ‘VAT paid status’ or ‘status of Union Goods’ on boats and goods after the UK leaves the EU. Unfortunately, the White Paper didn’t provide the clarity that British Marine has been seeking on where those goods that are VAT paid and are assumed to have the status of Union Goods stand after Brexit.

British Marine’s concerns were heightened further following the highly publicised debates in Parliament this week on the Government’s Taxation (Cross-border Trade) Bill. Four key amendments to this Bill were tabled by the Eurosceptic European Research Group of Conservative MPs in opposition to elements of the customs proposal contained in the White Paper.

One amendment in particular (number 73) was of significant interest/concern. This amendment prohibits the UK from staying in the EU’s VAT area, creating a VAT border between the UK and EU after Brexit. This amendment means that, without a favourable negotiated agreement between the UK and the EU, boats and goods in the UK which have already been placed on the market in the EU could be subject to VAT if sold across the new UK/EU border.

The vote on the amendment narrowly passed by 303 votes to 300, with 11 Conservative MPs joining opposition MPs in voting against. The Bill will now go to the House of Lords in the autumn, where Peers may vote to remove the amendment, meaning that another vote on it would take place by MPs before the Bill can receive Royal Assent.

The alternative to this Parliamentary process is the Government’s customs policy evolving in the autumn to propose an even closer customs and VAT relationship with the EU than that contained in the White Paper. In this case, the Government would look to remove the amendment from the Bill to allow it to pursue its alternative policy.

British Marine, working closely with members and partners, such as the RYA, has spent the last 18 months briefing industry’s concerns in to various Ministers and officials across multiple departments, as well as a number of friendly and relevant MPs. The whispers coming out of HM Treasury are that the Government understands the marine industry’s concerns on VAT (indeed these concerns are shared across many sectors) and it is a priority for them to develop a proposal that safeguards these industries. However, as these recent publications and updates show, the UK Government is far from putting forward clear plans on how it intends to achieve this. In the coming months British Marine will continue in its role to push Government to deliver a suitable solution that safeguards the industry and member businesses.

All of British Marine’s updates and guidance on Brexit are available on the Brexit pages of the British Marine website and further updates will be published in due course. Any member company with questions on Brexit or with information that could prove useful to British Marine’s work, should contact Andrew Harries at aharries@britishmarine.co.uk or call 01784 223634.