Financial Secretary (): The government is
committed to taking full advantage of the opportunities available
following EU exit to improve the tax system and has made strong
progress in removing, replacing and improving retained EU tax
law. This includes disapplying direct EU regulations in relation
to customs, VAT and excise and introducing a UK tariff and
domestic customs regime, including a range of easements and
facilitations that were not available under EU rules.
The government has also introduced a number of other reforms
following EU exit, including: revising and modernising the VAT
rules for the importation of low value parcels; changing the
rules of duty free and tax free shopping; reforming the rules on
VAT on cross-border financial services; introducing a zero rate
of VAT for women’s period products; expanding the VAT relief for
the installation of energy-saving materials and introducing a
temporary zero rate; and overhauling the UK’s alcohol duty regime
to radically reform the way duty is charged on alcohol, the
biggest change in 140 years.
The government remains committed to embedding this approach and
continuing to take advantage of the opportunities provided by EU
exit to reform and improve the tax system through the established
Finance Bill and tax policy-making process. For example, Spring
Budget 2023 announced that the government would continue
discussions with interested stakeholders on reform of the VAT
rules on fund management and possible reforms to simplify the VAT
treatment of financial services, with the aim of reducing
inconsistencies and providing businesses with greater clarity and
legal certainty. On 18 July 2023, the government published a
consultation on legislative reforms to modernise the legislation
that underpins the VAT treatment of certain wholesale commodity
transactions. This consultation closed on 12 September 2023 and
the government is now considering the responses.
Building on this progress, and in line with the Tax Policy Making
framework, the government is publishing draft legislation in
relation to retained EU law for VAT and excise ahead of potential
inclusion in the next Finance Bill. While the final contents of
the next Finance Bill will be a decision for the Chancellor, the
draft legislation is being published to seek stakeholder views at
this stage. This allows for technical consultation and provides
taxpayers with predictability over future tax policy changes.
This legislation clarifies how VAT and excise legislation should
be interpreted in the light of changes made by the Retained EU
Law (Revocation and Reform) Act 2023 (REUL Act). The REUL Act
ends the supremacy and special status afforded to retained EU law
in the UK. In relation to VAT and excise, the government confirms
that it will no longer be possible for any part of any UK Act of
Parliament or domestic subordinate legislation to be quashed or
disapplied on the basis that it was incompatible with EU law.
As previously announced, the government is taking a bespoke
approach in relation to UK VAT and excise law so that it
continues to be interpreted as Parliament intended, drawing
on rights and principles that currently apply in interpreting
UK law. This legislation ensures the stability of the VAT and
excise regimes and provides legal certainty for business
following the changes in the REUL Act taking effect. It mitigates
the risk of re-litigating settled interpretation of UK law,
protecting billions of pounds of Exchequer revenue - VAT and
excise duty from alcohol, tobacco and hydrocarbon oil raise over
£200 billion of revenue per year.
The draft legislation is accompanied by a Tax Information and
Impact Note and an Explanatory Note. The documentation has been
placed in the Libraries of the House and can be found at:
www.gov.uk/government/publications/interpretation-of-vat-and-excise-legislation
