Thank you for contacting me about retailers and trade with the EU.
The Trade and Cooperation Agreement reached with the EU is an historic achievement that delivers on the promises of the EU referendum in 2016 and the Conservative Party manifesto which the British people supported in the General Election 2019. It ensured that the UK took back control over its money, borders, laws and fisheries with no role for the European Court of Justice.
The Agreement contains broad provisions on services and locks in market access across substantially all service sectors, although there are exceptions in some sectors and for some member states. It also includes a commitment for the UK and the EU to review the arrangements with a view to making future improvements. There are specific provisions on telecommunication and digital services, maritime transport services and delivery services. A framework for regulatory cooperation in financial services has also been agreed with a view to finalising the details by March.
The deal reached between the UK and the EU also helps to ensure that both sides cooperate on digital trade in the future. It is the first time that the EU has agreed to data provisions in a trade agreement. Strong data protection arrangements are also being put in place with online consumer protection and anti-spam provisions. Requirements to store or process data in a certain location are prohibited and so avoiding unnecessary costs for businesses.
Interim data adequacy agreement: The EU has been working on its adequacy decision for UK’s data protection standards since March 2020. The European Commission produced a draft adequacy decision in February and the UK has urged the EU to reach a final adequacy decision as soon as possible. Personal data flows with the EU will continue as they did before the end of the transition period until 30 June but the UK has had full autonomy over its data rules since 1 January 2021.
I understand your concerns about customs duties but under the terms of the deal agreed with the EU, products which do not substantially originate in the UK or the EU are not classed as UK or EU goods. This means that they do not benefit from preferential treatment under the terms of the trade deal.
Regarding your concerns relating to the registration and the collection of VAT on behalf of HMRC, I understand that HMRC published clear guidance on how EU based businesses could be ready to trade with the UK this year, and that this guidance is still available at https://www.gov.uk/eubusiness.
It is correct that if a business is based outside the UK must pay import VAT on parcels sold to UK buyers if the goods are worth £135 or less to UK buyers. If selling goods sent in parcels worth over £135, the import VAT, Customs Duty (and Excise Duty where applicable) should be paid by the UK buyer and collected by the parcel operator. This ensures that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports.
VAT Rates: Any decision to modify our tax regime is a matter for the Treasury and careful consideration will be given to any proposed amendments to current VAT rates. I understand that the Government keeps all taxes under review, including VAT. I shall be following the developments on this issue closely, and I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue.
Double taxation treaties are bilateral agreements between the UK and the relevant country. These agreements thereby remain in force regardless of the UK’s exit from the EU.
The UK’s exit from the EU means that some payments between UK and EU resident associated companies will be subject to differing withholding taxes, as the EU Parent/Subsidiary Directive and the EU Interest/Royalties Directive are no longer available to UK resident companies. However, many parts of these directives are already legislated for within UK domestic tax legislation.
The UK is free to renegotiate existing double taxation treaties so that they replicate the previous position on withholding taxes, and EU countries might amend their domestic tax rules for this purpose also.
Negotiations on new double taxation treaties are usually split into rounds to discuss the negotiated text, however a negotiation may have just one round when the positions of both countries are essentially aligned.
It may be the case that a UK company wishing to take advantage of treaty rates of withholding tax will need to make new or amended withholding tax applications.
Thank you again for taking the time to contact me.
Craig Whittaker MP