Taxation (Post-transition Period) Bill — House of Commons, 2020-12-09
Topic: Macroeconomics
Olukemi Olufunto Badenoch (Conservative, Centre-right): It is a privilege to close this debate on behalf of the Government, and I thank Members from all parts of the House for their thoughtful and varied contributions At the end of this month, the transition period will end. As my right hon. Friend the Financial Secretary pointed out at the beginning of today’s debate, we have a great responsibility to be ready for this event. The measures contained in the Taxation (Post-transition Period) Bill will play an important part in the preparations Let me take this opportunity to thank Opposition Members for their constructive and collegiate approach throughout the passage of this Bill, despite their evident reservations, and in that same spirit I will address some of the points raised in today’s debate The Bill is an essential part of our preparations for the end of the transition period. It takes forward important changes to our tax system to support the smooth continuation of business across the UK. It contains six measures. Three relate to the implementation of the Northern Ireland protocol and three implement wider changes to the tax system, which are needed before 1 January. Most importantly, it will ensure that we meet our commitments to Northern Ireland, including on unfettered access and those commitments as set out in the Northern Ireland protocol. Taken together, the measures form an important part of our preparations as we resume our place as a fully sovereign trading nation Now that we have further clarity on the outcome of the Joint Committee negotiations, it is vital that the provisions are in place before the end of the transition period to provide that certainty. The Bill’s passage is necessarily rapid, but it will allow for these important changes to be implemented on time. The right hon. Member for Wolverhampton South East (Mr McFadden) asked if we believed it can be done, and my answer is yes, of course. The UK Government will take forward a pragmatic approach that draws upon available flexibilities to implement the protocol without causing undue disruption to lives and livelihoods The Government are committed to supporting business. At the centre of the package is the free-to-use trader support service, which will support business when moving goods into Northern Ireland, educating traders on what the protocol means for them and completing customs safety and security declarations on their behalf. That is working. Since the launch of the registration portal in September, more than 18,000 businesses have signed up for support from the trader support service Turning to Members’ comments, the hon. Member for North Down (Stephen Farry) requested confirmation that the UK meets its obligations. The powers in the Bill allow us to implement the Northern Ireland protocol in a way that is consistent with our obligations, and I appreciate his broader supportive statements. My hon. Friends the Members for South Ribble (Katherine Fletcher) and for Harrogate and Knaresborough (Andrew Jones), among others, rightly referred to our closing of the VAT loophole in clause 7 and schedule 3. Low-value consignment relief is subject to widespread abuse and contributes to trade distortion. It disadvantages UK high street businesses that are required to charge VAT where overseas businesses are not, either for legitimate reasons or through abuse, and removing the relief will bring overseas sellers on to an equal footing with UK businesses My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) asked why the clause applied just to low-value goods and whether there was an opportunity for it to apply to high-value goods as well. The reason is that the £135 threshold aligns with the threshold for customs duty liability. Imports of goods greater than £135 in value are subject to enhanced customs requirements, which would negate the benefit of moving VAT away from the border. Therefore, imports of goods greater than that amount will remain subject to the current model for goods arriving from non-EU countries, where VAT is collected at the point of importation My hon. Friend also asked what revenue we expected from this change. The Office for Budget Responsibility has forecast that these changes will raise over £300 million a year over the next five years, and £1.6 billion over the scorecard period. Approximately two thirds of that will come from improving collection and tackling non-compliance through the new VAT treatment of cross-border goods, and the final third of the revenue will come from the removal of low-value consignment relief, which will end widespread abuse of this relief My right hon. Friend the Member for Wokingham (John Redwood) asked whether the ECJ would be the ultimate arbiter for VAT and excise. The ECJ will continue to have a role where EU directives apply in Northern Ireland—for example, where there are disputes on how the EU rules should be interpreted. However, the rules will continue to be policed by HMRC, which will continue to be the tax authority for the whole of the UK. He also mentioned Northern Ireland being subject to two regulatory systems. Northern Ireland is and will remain part of the UK and its VAT system. It is correct that the Northern Ireland protocol means that NI will continue to align with the EU VAT rules in respect of goods, but not services. That is to ensure that trade is not disrupted on the island of Ireland, and to allow us to meet our commitments under the Belfast/Good Friday agreement. But, as I said, HMRC will continue to be the tax authority for the whole of the UK. Businesses will continue to have a single UK VAT number, issued by HMRC, and they will submit only one UK VAT return to account for VAT on all supplies of goods and services My hon. Friend the Member for Stone (Sir William Cash) asked about the current negotiations. Just to remind him and reiterate to the House, the UK Government set out on 17 September that Parliament would be asked to support the use of provisions such as clause 45 of the United Kingdom Internal Market Bill and any similar subsequent provisions in a Finance Bill. These clauses were introduced as reasonable steps to create a safety net, so that the Government would always be able to deliver on their commitments to the people of Northern Ireland in the event that a negotiated outcome could not be reached in the Joint Committee. However, as we all now know, following intensive and constructive work over the past weeks by the UK and EU, we now have an agreement in principle on all issues in relation to the protocol on Ireland and Northern Ireland. As we have mutually agreed solutions, the UK can now withdraw clauses 44, 45 and 47 of the UKIM Bill and not introduce any similar provisions in this taxation Bill.