New VAT and customs regulations laid
Our weekly update of developments in Brexit-related secondary legislation – and it’s been a busy week.
VAT SIs
Three VAT statutory instruments (SIs) have been laid before Parliament this week, two of them subject to the affirmative procedure, which means they will be debated by MPs (probably in committee, potentially on the floor of the House of Commons). The government state that all three will only come into effect in event of 'no deal'.
Schedule 23 to FA2011 allows HMRC to issue a notice in writing to a relevant data-holder to require that data-holder to provide relevant data. These Regs add postal operators as a new category of relevant data-holder. Postal operators are defined as persons who provide the service of conveying postal packets from one place to another by post, or who provide any of the incidental services of receiving, collecting, sorting and delivering postal packets. The power to require a postal operator to provide relevant data is only exercisable by HMRC in relation to VAT.
Procedure: Made affirmative. Made 28/2/19; laid 1/3/19. Comes into force on day to be named by HMT. 4 pages.
Makes provision to repeal the changes which came into effect on 1 January 2019 in relation to the place of supply of digital services, for example phone apps, e-books or music downloads. These rules determine where VAT is due. VAT on these services supplied in the EU can be accounted for under a simplified procedure called the VAT Mini One Stop Shop (VAT MOSS). In the event of no-deal VAT MOSS will no longer apply as it is an EU scheme. The Taxation (Cross-border Trade) Act 2018 (TCTA) contains provisions to repeal the relevant primary legislation and there will be no reason to retain the changes brought into effect in January once the whole MOSS scheme ceases to operate.
Procedure: Made affirmative. Made 28/2/19; laid 1/3/19. Comes into force on day to be set by HMT by regulation. 4 pages.
SI 2019/408 - The Value Added Tax (Input Tax) (Specified Supplies) (EU Exit) (No.2) Regulations 2019
VAT is not generally charged on supplies of financial services but, in turn, businesses cannot reclaim any VAT they pay on the costs of making those ‘VAT exempt’ supplies. Businesses supplying customers outside the EU with certain exempt financial services, or services in connection with an export of goods to a place outside the EU, may reclaim any VAT they pay on the costs of making those supplies, even though those services would be exempt. These types of supplies are known as ‘specified supplies’. This SI extends the existing treatment so that, on EU exit, UK businesses will be able to reclaim VAT in relation to specified supplies made to customers in the EU.
Procedure: Made negative. Made 28/2/19; laid 1/3/19. Comes into force on day to be set by HMT by regulation. 4 pages.
You can view the full set of Brexit-related VAT SIs published so far here.
Customs SIs
Affirmative procedure (An SI laid under the affirmative procedure must be actively approved by both Houses of Parliament. Certain SIs on financial matters are only considered by the Commons)
Three customs statutory instruments (SIs) have been laid under the affirmative procedure, after the sifting committees disagreed with the government and recommended that they needed to be debated in parliament.
Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019
The purpose of this instrument is to amend EU regulations which are being brought into force in the UK by the European Union (Withdrawal) Act 2018 (EUWA). The instrument will ensure that the UK has a customs regime in place and ready to take effect from the date of departure to ensure registration of traders when the UK leaves the EU.
Procedure: Draft affirmative. Laid: 27 February 2019. Comes into force on exit day. 4 pages in length. Explanatory memo can be read here.
Customs Safety and Security Procedures (EU Exit) Regulations 2019
This instrument forms part of legislation to be made under the EUWA to ensure that, in the event of the UK leaving the EU without a negotiated deal, the UK has a customs safety and security regime in place before the date of departure. It does not apply to the UK-Irish Republic border.
Procedure: Draft affirmative. Laid: 27 February 2019. Comes into force on exit day. 7 pages in length. Explanatory memo can be read here.
The Cash Controls (Amendment) (EU Exit) Regulations 2019
The purpose of this instrument is to amend retained EU law to ensure that it works to collect information from individuals who are carrying cash in excess of £10,000 into or out of the UK in the event that the UK leaves the EU without an agreement.
Procedure: Draft affirmative. Originally laid 31/1/19. Laid before Parliament under affirmative procedure 27/2/19. Comes into force on exit day. 3 pages in length. Explanatory memo can be read here.
These three SIs will be debated and potentially voted on by a parliamentary committee (dates to be sets) unless it is deemed they are significant enough to be debated on the floor of the House of Commons.
Negative procedure (An SI laid under the negative procedure becomes law on the day the Minister signs it and automatically remains law unless a motion – or ‘prayer’ – to reject it is agreed by either House within 40 sitting days. Certain SIs on financial matters are only considered by the Commons)
Four customs SIs subject to negative procedure have also been published. As things stand these will automatically become law without a debate.
The Customs (Revocation of Retained Direct EU Legislation, etc.) (EU Exit) Regulations 2019
Forms part of legislation to be made under the EUWA to ensure that, in the event of the UK leaving the EU without a negotiated deal, the UK has an independent customs regime in place before the date of departure. It will revoke retained EU legislation which will not be needed if the UK leaves the EU without a negotiated deal and ensure that imports and exports between the Channel Islands and the UK are excluded from the collection of trade statistics.
Procedure: Draft negative. Published 28/2/19. Comes into force on exit day. 6 pages. Explanatory memo can be read here. This SI will be considered by the European Statutory Instruments Committee on March 12th.
This instrument includes a range of temporary measures to enable trade to continue to flow while maintaining essential customs procedures. It provides for a simpler process for gaining authorisation to use simplified customs procedures, and includes easements for notifying HMRC when goods have arrived in the UK. It simplifies and relaxes the requirements for delaying the time of payment, and for financial guarantees. It relaxes the liability rules where an intermediary uses their own Customs Freight Simplified Procedure authorisation on behalf of traders. It will provide for an interim process for arrival of goods under the Common Transit Convention for a small number of entry ports. These measures together will facilitate trade between the EU and the UK in the event of the UK leaving the EU without a deal where the UK will be no longer in the Customs Union.
Procedure: Made negative. Made 27/2/19; laid 28/2/19. The Regulations will be brought into force in relation to approvals and authorisations on 21st March 2019 and the remainder by way of a separate SI. 16 pages. Explanatory memo can be read here.
SI 2019/385 - The Customs (Crown Dependencies Customs Union) (EU Exit) Regulations 2019
The instrument would modify various customs rules to take account of the customs union arrangements between the UK and the Crown Dependencies (Isle of Man, Bailiwick of Guernsey and Bailiwick of Jersey), which will take effect once the UK and the Crown Dependencies cease to be part of the customs territory of the EU.
Procedure: Made negative. Made 27/2/19; laid 28/2/19. Will comes into force under regs if UK leaves EU without a negotiated deal. In the event of a negotiated deal these provisions would not be required until the end of the implementation period, and may need to be adjusted in the light of a future customs arrangement with the EU. 8 pages. Explanatory memo can be read here.
The Customs (Enforcement of Intellectual Property Rights) (Amendment) (EU Exit) Regulations 2019
The instrument will ensure that UK legislation is in place after exit day (29 March 2019) enabling HMRC to continue to be able to enforce intellectual property rights at the UK border in the event that the UK leaves the EU without a withdrawal agreement.
Procedure: Draft negative. Laid 1/3/19. Comes into force on exit day. 6 pages. Explanatory memo can be read here.
Select committee scrutiny
The Joint Committee on Statutory Instruments has reported a customs SI for failure to comply with proper legislative practice and for requiring elucidation:
SI 2019/121 - The Customs Safety and Security (Penalty) Regulations 2019
The instrument forms part of legislation to be made under the European Communities Act 1972 to ensure that the UK has a safety and security penalty regime in place. It makes provision for civil penalties for non-compliance with certain safety and security obligations. Safety and security is paramount to a nation’s protection against threats from terrorism, trade in illegal guns and drugs. This instrument will continue to have effect under the European Union (Withdrawal) Act 2018 in the event of the UK leaving the EU without a deal to ensure the safety and security penalty regime remains operable after the UK departure date. This instrument will also correct an error in the Customs (Contravention of a Relevant Rule) Regulations 2003.
Procedure: Made negative. Made 29/1/19; laid 30/1/19; came into force 20/2/19. 8 pages.
The questions put to HMRC by the committee were:
1) Explain why the preamble to this instrument does not contain the usual express wording stating that it appears to the relevant person that it is necessary or expedient for references to EU instruments to be construed as references to those instruments as amended from time to time. Responding, HMRC regretted the omission.
2) Explain by reference to examples what is intended by the reference to a person acting in good faith in regulation 5(2)(b). HMRC set this out in their response.
Excise SIs
No new excise SIs have been tabled.
Software suppliers data gathering regulations laid
House of Commons – Non-Brexit statutory instruments
Five non-Brexit statutory instruments were laid this week relating to tax.
Delivery of Tax Information through Software (Ancillary Metadata) Regulations 2019
This instrument imposes a requirement on software suppliers who offer products which are used to deliver tax-related information to HMRC electronically. The requirement is to ensure that their software products operate so that any delivery of tax-related information is accompanied by the delivery of metadata, for example the identity of the device or server being used to interact with HMRC. This metadata is used for fraud prevention and to protect customer data. The instrument will ensure that HMRC continues to collect the same data as it does now for all customers. The instrument gives the Commissioners for HMRC (the Commissioners) the power to specify, by direction, the relevant metadata. The instrument makes provision for a penalty for non-compliance with the requirement.
Procedure: Made negative. Laid date: 26 February 2019. Comes into force 19 March 2019. Explanatory memo can be read here.
Income Tax (Approved Expenses) (Amendment) Regulations 2019
These regulations help to enact an exemption from income tax for payments and reimbursements of expenses incurred by employees in respect of accommodation and subsistence during overseas travel.
Procedure: Made negative. Laid date: 26 February 2019. Comes into force 19 March 2019. Explanatory memo can be read here.
Income Tax (Construction Industry Scheme) (Amendment) and the Corporation Tax (Security for Payments) Regulations 2019
These regulations give HMRC the power to require a person to provide security for payment of sums which are, or may become, due from a contractor under the Construction Industry Scheme and from a company in respect of corporation tax which it is, or may become, liable to pay. hese regulations set out the circumstances in which security may be required, who it may be required from, the procedural requirements to be satisfied where security is sought and appeal rights. They also specify the period of time that a person has to give the security sought before the offence of failure to provide security in section 70A(4) of the Finance Act 2004 (FA 2004) or paragraph 88A(4) of Schedule 18 to the Finance Act 1998 (FA 1998) is committed.
Procedure: Made negative. Laid date: 28 February 2019. Comes into force 6 April 2019. Objection period ends 26 April 2019. Explanatory memo can be read here.
Tax Credits, Child Benefit and Childcare Payments (Miscellaneous Amendments) Regulations 2019
This instrument makes changes to tax credits, Child Benefit and Tax-Free Childcare regulations. As well as making consequential changes following changes elsewhere to ensure that claimants maintain their entitlement, it also updates various references to Departments in Northern Ireland that no longer exist and to a number of outdated references in domestic legislation which have been revoked and replaced by the Immigration (European Economic Area) Regulations 2016.
Procedure: Made negative. Laid date: 27 February 2019. Comes into force: 21 March 2019. Objection period ends: 25 April 2019. Explanatory memo can be read here.
Tonnage Tax (Prescribed and Specified Matters) Regulations 2019
These Regulations prescribe a three year period, and specify the meaning of the percentage of the tonnage tax fleet which is “Community-flagged” (registered in the European Union (EU) or European
Economic Area (EEA) or the United Kingdom (UK)), for the purposes of paragraph 22C(1)(a) of Schedule 22 to the Finance Act 2000. This facilitates the making of an order under paragraph 22B(2) of that Schedule which cannot be made until the Treasury is satisfied the percentage of the tonnage tax fleet which is Community-flagged has not decreased on average over a three year period that is prescribed in regulations.
Procedure: Made negative. Laid date: 1 March 2019. Comes into force: 22 March 2019. Objection period ends: 27 April 2019. Explanatory memo can be read here.
By George Crozier, CIOT Head of External Relations.