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Statement on Infraction Proceedings on Vat Treatment of Certain Commodity Derivatives Trading

The European Commission on 8th March 2018 provided notification of infraction proceedings against the UK in respect of VAT treatment of certain commodity derivatives, trading under the Terminal Markets Order (TMO). The TMO is a Statutory Instrument (SI) that allows a specific VAT zero rate for derivative transactions in spots, futures (and options on) commodity contracts, when traded on an exchange.

The UK received a "letter of formal notice" from the EU Commission pursuant to Article 258 of the Treaty on the Functioning of the European Union. This is the first stage of the infraction process. The letter sets out the Commission’s initial views on the UK's VAT treatment of certain exchange traded commodity derivatives, and invites a response from the UK Government within two months.

The UK Government will consider the Commission's views and will respond in due course. The issuance of the letter does not have any immediate effect on UK tax law and the matter will be subject to the normal infraction process, which is open to challenge.

The tax treatment of commodity derivatives is unchanged. UK tax law stands unless and until such time as it is changed and therefore past and current trading activity under the Terminal Markets Order is not affected by the issuance of the Article 258 letter.

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UK Government to Table Devolution Amendments to EU Withdrawal Bill

UK Government will table proposed changes to the devolution aspects of the EU Withdrawal Bill to allow Parliament to have an open and informed debate on proposals.

The decision to proceed with the amendments to the Bill in the UK Parliament came after meeting held on 8th March 2018 of the Joint Ministerial Committee on EU negotiations where Mr Lidington said it was now imperative for the UK Government to fulfil the commitment given to Parliament to table changes to Clause 11 of the Withdrawal Bill.

The Minister said that discussions with the devolved governments would continue in the hope of reaching an agreement but the need for Parliament to have a detailed debate on the issues that have been discussed for some time now between the various governments had to be respected. The House of Lords are due to debate Clause 11 of the Bill in just over a week.

The proposed amendment will mean that all EU powers that intersect with devolved competencies will go directly to the devolved parliaments and assemblies at the time of Brexit. In addition, there would be a provision for the UK Government to maintain a temporary status quo arrangement over a small number of returning policy areas where an agreement for a UK framework had not been reached in time for EU Exit. This is to protect the UK common market and ensure no new barriers are created for consumers and businesses.

Joint Ministerial Committee (EU Negotiations) communique

The eighth Joint Ministerial Committee (EU Negotiations) met on 08th March 2018 in 70 Whitehall. The meeting was chaired by the Rt Hon David Lidington MP, Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office.

The attending Ministers were:

From the UK Government: the Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office, Rt Hon David Lidington MP; the Secretary of State for Northern Ireland, Rt Hon Karen Bradley MP; the Secretary of State for Wales, Rt Hon Alun Cairns MP; the Secretary of State for Scotland, Rt Hon David Mundell MP; the Parliamentary Under Secretary of State for Exiting the EU, Robin Walker MP; and the Parliamentary Under Secretary of State for Northern Ireland, Shailesh Vara MP.

From the Welsh Government: the Cabinet Secretary for Finance, Mark Drakeford AM.

From the Scottish Government: the Minister for UK Negotiations on Scotland's Place in Europe, Michael Russell MSP.

Dr Andrew McCormick, Director General International Relations from the Northern Ireland Civil Service attended the meeting in the continued absence of a Northern Ireland Executive.

The Chair opened the meeting by summarising official level engagement since the Committee last met, including discussions on the proposed amendment to the EU (Withdrawal) Bill. The Committee discussed the UK Government's proposed amendment to clause 11 and progress made towards reaching agreement. The Committee noted the timings for the Committee Stage debate in the House of Lords. All administrations remained committed to reaching agreement on the EU (Withdrawal) Bill. Discussions on further detail on the proposal would continue between the UK Government and Scottish and Welsh Governments in the coming weeks.

JMC (EN) noted and agreed the UK Government's intention to publish its frameworks analysis and committed itself to continuing work towards agreements on common frameworks.

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9 March 2018
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