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Brexiters' favoured customs proposal could cost businesses £20bn

City A.M. Wednesday, 23 May 2018
Brexiters' favoured customs proposal could cost businesses £20bnBrexiters' favoured customs union proposal could cost businesses up to £20bn, the head of HM Revenues & Customs has warned. 

And while Theresa May's preferred option carries far lower costs, it could take up to five years to implement.  

Jon Thompson, chief executive of HMRC, confirmed that the new customs partnership - in which the UK collects tariffs on behalf of Brussels for goods that are travelling via the UK on their way to the EU - could take five years before it is up and ready. 

The “maximum facilitation” option, which allows so-called “trusted traders” to cross the Northern Ireland and other EU borders freely after Brexit, aided by technology, could take three years to deploy. 

Although there could be a functioning border by January 2021, but not "fully optimal" as foreign ports might not be ready, he told the Treasury Select Committee.

Another issue is that repayment mechanisms might not be in place, not least because businesses would want to wait for a while to see whether reclaiming money under the customs partnership proposal would be worthwhile. 

Thompson said it was "quite difficult" to give an exact deadline for when a decision was needed on which option would be taken forward, although told chair Nicky Morgan: "The quicker we get a decision, the quicker we can implement what the government wants".

Jim Harra, deputy chief executive, pointed out that the options "do require third parties to start to act, and they will not do so just because a minister tells them to do so".

Meanwhile the “max fac” system could cost business between £17bn and £20bn. The new customs partnership would cost would be £3.4bn at most, he said, although added that ultimately it could be cost-neutral because firms would get a refund.

However both options as currently envisaged have been rejected by Brussels, and there is no consensus even within Cabinet, where the deadlock has forced May to put forward a backstop solution of a temporary extension to the customs union.

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