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What does the UK-EU Brexit deal say about tax?

What does the UK-EU Brexit deal say about tax?


The Trade and Cooperation Agreement (TCA) signed by the UK and the EU in December 2020 contains a number of provisions which relate to tax.  In this briefing, we look at what they are and how far they could constrain the UK's room for manoeuvre on tax issues in future.  We also highlight a number of issues which are not addressed by the TCA, but are causing problems in practice – notably in relation to VAT and customs duties.


Overall, the most significant provisions of the TCA in terms of their impact on future UK tax policy are probably those relating to customs and export duties and state aid.  However, the TCA also contains provisions relating to VAT, customs cooperation and international standards in tax policy.  Each of these is considered separately below.

Customs and export duties

The TCA provides for zero tariffs on trade in qualifying goods between the UK and the EU.  The critical words here are "qualifying goods";  goods which do not meet the rules of origin in the TCA will not qualify for preferential treatment.  This is already causing difficulties in some sectors.  For more detail on rules of origin, click here.


The TCA also prohibits duties being imposed on exports between the parties – for example, the UK cannot require a UK-based business to pay a tax triggered by the export of its goods to the EU (and vice versa).  Such duties are sometimes imposed where a state wishes to deter businesses from engaging in export trade e.g. where a certain type of goods is in short supply and there is a desire to prioritise domestic customers.  However, export duties are not as widely used as tariffs (which are imposed on imported goods) and where the UK had concerns about shortages, it could probably use non-tax measures (e.g. based on national security) to restrict or prohibit export (taking advantage of carve-outs in the TCA for this type of situation).  As such, the UK is unlikely to find this prohibition particularly constraining in practice.

State aid

The TCA's level playing field provisions set out high level principles relating to state aid which both parties are obliged to respect.  In particular, these will require the UK to implement a domestic state aid regime based on high level principles similar to those underlying the EU regime, covering both goods and services (unlike the WTO regime, which only applies to goods).  Critically, this state aid regime is likely to apply to certain tax measures – in much the same way that the EU state aid rules have, in some cases, been held to apply to taxation.   This is likely to constrain the UK's freedom to offer certain types of tax breaks, for example to attract inward investment.  The level playing field provisions also set out special procedures for disputes concerning the alleged award of specific subsidies (or other state aid measures) in breach of the high level principles referred to above.   The position is further complicated by the fact that, under the Northern Ireland Protocol, EU state aid law will continue to apply to any aid granted in the UK which may affect trade in goods or electricity between Northern Ireland and the EU.  For more on the implications of the TCA for state aid, see this briefing.

VAT and customs cooperation

As part of the arrangements for customs cooperation (see below), the TCA includes a Protocol on VAT which is outlined in the textbox below.


The Protocol provides for the UK and EU Member States to:

  • request VAT information from each other and introduce arrangements for the automatic exchange of VAT information (the type of information to be exchanged is to be determined by a specialised committee);

  • spontaneously supply each other with certain VAT information e.g. in relation to missing trader fraud; and

  • make a request that another State enforces a claim relating to VAT, customs duties or excise duties,
    including taking precautionary measures (where possible under local law) if the claim is contested or the instrument of enforcement has not been finalised in the requesting State.


It will be apparent from the above that the VAT Protocol is essentially a state-to-state mechanism; it does not materially assist businesses with any of the VAT issues arising out of the end of the transition period. For guidance on VAT issues relating to the impact of Brexit on goods trade, see this Q&A.

The TCA also provides for both the UK and the EU to cooperate on customs matters. Among other things, it includes provisions requiring the parties to:

  • allow "trusted traders" with either UK or EU Authorised Economic Operator (AEO) status to benefit from simplified procedures;
  • endeavour to establish a single window to enable traders to submit documentation (which could, in time, simplify relevant paperwork requirements); and
  • cooperate to facilitate high volume roll-on roll-off ferry traffic and other similar services (e.g. Eurotunnel)

These provisions are welcome and provide a useful foundation to build on.  However, they are unlikely to do much in the short term to alleviate the probable disruption to supply chains arising out of the UK's departure from the EU Single Market and Customs Union.  In particular, there has been considerable confusion on the following issues:

  • Import VAT and customs duties on sales of goods to UK consumers by EU sellers – click here to watch our short video (8 minutes)

  • UK businesses restricting deliveries of goods to Northern Ireland – click here to watch our short video (8 minutes)

For more information on changes to arrangements for UK-EU goods trade, see our Brexit Goods Q&A.

International standards


Finally, the level playing field section of the TCA includes commitments by the parties to observe certain international standards in relation to governance and standards in tax policy. These provisions are not subject to the TCA's dispute resolution mechanism, which would make them difficult to enforce in practice. However, historically, both the EU and the UK have supported the relevant international standards, which suggests that a serious failure to respect them in future is unlikely. The textbox below headed "Mandatory disclosure of tax planning" provides an example of how the UK has already diverged from existing EU rules on tax matters, within the confines of the level playing field.


The TCA limits level playing field obligations relating to the disclosure of tax planning arrangements to adherence to the OECD's mandatory disclosure rules, which are considerably more limited in scope than the EU Mandatory Disclosure regime (DAC6). This has given the UK the ability to publish regulations which limit the scope of DAC 6 in the UK with effect from 11pm on 31 December 2020. Reporting under DAC 6 will still be required by UK intermediaries and taxpayers for a limited time, but only arrangements which trigger the D Hallmarks (arrangements which obscure beneficial ownership or which thwart effective OECD CRS reporting) will be reportable. HM Revenue & Customs has confirmed that this change also applies to arrangements entered into prior to 1 January 2021. Over the coming year, the UK Government intends to repeal the legislation implementing DAC 6 in its entirety and implement the OECD's mandatory disclosure rules instead.  This change will reduce the DAC 6 compliance burden on businesses that focus mainly on the UK, but those with wider EU operations will still need to operate the full rules.

Find out more about the TCA

For more information on the TCA generally, see our Business-friendly guide to the UK-EU Brexit trade deal, which breaks it down by topic and includes links to the relevant provisions under each heading.

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