Provisional Brexit deal agreed: what’s it about?

The provisional Brexit deal was presented by Brexit negotiators Michel Barnier and Donald Tusk at the end of November. The deal comprises two separate components. The first part focuses on the Separation Treaty that facilitates the United Kingdom’s departure from the European Union. It ensures that both parties are legally bound to comply with the agreements they have made. The second part of this provisional deal comprises a political declaration on the future relationship between the United Kingdom and the European Union. However, this declaration is not legally binding in nature and there is currently no formal agreement on it.

Transition period

The separation agreement primarily focuses on the so-called transition period. The transition period runs from 29 March 2019 to the end of 2020 and ensures that nothing changes in practice. The United Kingdom shall therefore remain a member of the Customs Union and the internal market during this period. However, the United Kingdom will no longer have any voting rights and will no longer form part of the decision-making bodies during this transitional period. The intention is for the UK and the EU to continue negotiating their future relationship.

Customs union

The separation agreement makes it clear that the European Union and the United Kingdom shall enter into a customs union at the end of the transition period, provided that no agreement on a future relationship has been reached by that time. This implies that the way we do business with the United Kingdom will change irrevocably following the transition period.

It is important to note that no customs tariffs and quotas shall apply between the UK and the EU. However, since the UK will no longer be part of the single market, delivery to the UK shall technically constitute a VAT exempt export. Thus, all deliveries from the UK shall constitute a taxable import and will invariably require the requisite formalities, such as the provision of a customs document. 

Caution required

It should be noted that this provisional deal does not guarantee a transition period from 29 March 2019 to the end of 2020. The deal must first be approved by both the British government and the British Parliament. This is not yet the case. Crucially, there is no majority for this in Parliament. The potential for a hard Brexit on 29 March 2019 without a transition period and a subsequent customs union therefore still exists.

Should you have any questions concerning the concrete impact on your business and further Brexit developments, then please contact your account manager or one of our specialists via contact@vdl.be.