One new SI relevant to tax advisers has been tabled this week: Value Added Tax (Input Tax) (Specified Supplies) Regulations 2019. This is a ‘made negative’ resolution (see below), laid on Feb 5th with the objection period running out on Mar 16th.
These Regulations amend the Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (S.I. 1999/3121) (“the 1999 Order”) to make changes required as a consequence of the withdrawal of the UK from the EU. They maintain the tax treatment (exemption without refund) that existed prior to Brexit for specified supplies of services supplied to persons who belong outside the UK but within the EU, or which are directly linked to the export of goods to a place outside the UK but within the EU. This instrument will be covered by an overarching HMRC impact assessment on VAT and services which will be published here.
Treatment of Statutory Instruments
The treatment of statutory instruments (SIs) is a complex and confusing area. First there is the distinction between affirmative and negative SIs. Affirmative SIs (in theory at least the more significant ones) must be approved by Parliament, though usually this is done by a small committee of MPs after just a few minutes of debate at which the minister and shadow minister are typically the only speakers. Occasionally parliamentary business managers agree that an SI is so contentious that a debate will take place on the floor of the House of Commons. Lords also debate most SIs but not tax-related ones.
Negative SIs become law on the date stated in the SI unless either House annuls (stops) them within a fixed 40-day period. If both Houses are not sitting for a period longer than four days, the time limit will pause. For tax and customs SIs only the Commons can object to them. The process for annulling an SI is that a ‘prayer’ motion is tabled by an MP and the government may choose to either refer the SI to a committee for consideration or schedule time for debate on the SI in the Commons Chamber. In some circumstances the opposition may be able to allocate time to an SI for a debate. Beyond this they may simply use ‘the usual channels’ (meetings of party whips) to put pressure on the government to do so. Most negative SIs are ‘made negative’ which means they have already been signed by the Minister before they are laid in Parliament and can come into force before the end of the objection period.
Additionally all SIs are reviewed by a committee to assess the technical qualities of each instrument and to decide whether to draw the special attention of Parliament to any instrument. Most SIs are reviewed by the Joint Committee on Statutory Instruments (JCSI), which includes peers as well as MPs, but those where the Lords does not have a say (mostly tax-related SIs) are considered by a Commons-only Select Committee on Statutory Instruments (SCSI), made up of MPs only.
Select Committee on Statutory Instruments
In recent reports the SCSI has reported two SIs relevant to tax advisers for being flawed.
At the Committee’s meeting on 30 January 2019 it reported the Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 on the grounds that they are defectively drafted in two respects, make unusual or unexpected provision in one respect, and require elucidation in two respects. Further information available here.
These Regulations make provision about VAT under the Taxation (Cross-border Trade) Act 2018 in preparation for the United Kingdom’s withdrawal from the European Union. They create a regime in which overseas suppliers, rather than UK recipients, are liable for payment of import VAT in relation to goods shipped in a postal packet.
At the Committee’s meeting on 16 January 2019 it reported the Customs (Contravention of a Relevant Rule) (Amendment) (EU Exit) Regulations 2018 on the ground that they are defectively drafted in three respects and require elucidation in one respect. Further information available here.
These Regulations are part of a suite of instruments made under the Taxation (Cross-border Trade) Act 2018 (“TCTA”) which create a new customs regime that will be put in place following the withdrawal of the United Kingdom from the European Union. Regulation 5 amends the Schedule to the Customs (Contravention of a Relevant Rule) Regulations 2003 to change the circumstances or to prescribe additional circumstances in which customs penalties can be applied, to reflect the provisions of the TCTA and instruments made under it.
Does this mean anything? In general, a defective statutory instrument reported as such by the Joint Committee or the Select Committee can be amended only by way of a later statutory instrument either amending or replacing the original. Minor typographical errors can be rectified by a correction slip issued by the National Archives and shown on their website.
An adverse report of the Joint or Select Committee has no legal effect. In many cases, where the defect identified by the Committee undermines the efficacy of the instrument, the Government take action themselves by later instrument in order to ensure the effective delivery of their policy. The Committee cannot, however, force the Government to do so; nor does the Committee exercise any kind of policing function in relation to reports for defective drafting.