2018 No. 1228

1. Introduction

1.1 This explanatory memorandum has been prepared by Her Majesty’s Revenue and Customs (‘HMRC’) and is laid before the House of Commons by Command of Her Majesty.

2. Purpose of the instrument

2.1 This instrument addresses a deficiency in United Kingdom (‘UK’) legislation arising from its withdrawal from the European Union (‘EU’). It enables HMRC to respond to an enquiry relating to a UK Value Added Tax (‘VAT’) registration number (‘VRN’) by confirming its validity (or otherwise) and, where it is valid, providing the name and address of the registered person. It replaces the requirement imposed on HMRC by Council Regulation (EU) 904/2010 to provide UK VRN information to businesses, which ceases to apply to the UK after the UK leaves the EU.

4. Extent and Territorial Application

4.1 The territorial extent of this instrument is the United Kingdom.
4.2 The territorial application of this instrument is the United Kingdom.

6. Legislative Context

6.1 Sections 51 and 52 of the Taxation (Cross-border) Trade Act 2018 (‘TCTA’) provide the power for the Treasury to make regulations required as a consequence of, or otherwise in connection with, the withdrawal of the UK from the EU.

6.2 This instrument is made under those powers and will be the first of a number of Statutory Instruments which will ensure that the UK has a properly functioning VAT system after it leaves the EU.

6.3 EU member states are required by Article 31 of Council Regulation (EU) 904/2010 to provide information about VRNs including the names and addresses of registered persons to those involved in certain cross-EU border supplies of goods or services. The EU-hosted ‘VIES on the Web’ service facilitates this requirement by providing an electronic platform for Member States to provide this information to businesses.

6.4 After the UK withdraws from the EU and section 42(1) of the TCTA comes into force, the UK will no longer be subject to this requirement to provide information relating to VRNs. This instrument will allow HMRC to continue to confirm whether a given number is a valid UK VRN and, where it is valid, to provide the name and address of the person to whom that number is allocated.

6.5 Whilst section 18 of the Commissioners for Revenue and Customs Act 2005 (‘CRCA’) prohibits HMRC officials from disclosing information held in connection with HMRC’s functions, this prohibition is subject to other enactments permitting disclosure. This instrument will constitute such an enactment thereby permitting disclosure for the purposes of section 18 CRCA.

7. Policy background

7.1 Businesses can currently check whether a UK VRN is valid, and obtain confirmation of the name and address of that registered person. This disclosure is justified because checking the validity of a customer’s or supplier’s VRN forms part of most businesses’ due diligence. Businesses use this information to ensure that they are not unknowingly party to fraudulent activity. It also helps them to apply the correct VAT treatment to certain digital supplies. It therefore protects revenue collection and helps prevent VAT fraud.

7.2 HMRC currently makes this information available online through VIES on the Web. After the UK leaves the EU, this facility will no longer be available.

7.3 To ensure businesses can continue to check UK VRNs in a similar way, HMRC intends to provide an online service that will replicate VIES on the Web, but only for UK VRNs. This contributes to the Government’s commitment to minimise disruption to UK businesses after the UK leaves the EU and removes the need to contact HMRC directly to check a UK VRN. It encourages the use of digital services, lowering the number of telephone calls HMRC would otherwise have to answer.

7.4 HMRC has a good record of protecting information released through VIES on the Web and will put robust protections in place to prevent abuse. The measure meets current Data Protection Act 2018 requirements.

8. European Union (Withdrawal) Act/Withdrawal of the United Kingdom from the European Union

8.1 This instrument is not being made under the European Union (Withdrawal) Act 2018
but relates to the withdrawal of the UK from the EU. It allows HMRC to disclose
information relating to UK VRNs that is currently disclosed because of an obligation
in Council Regulation (EU) 904/2010, which will cease to apply after the UK has left
the EU. It is made using the power in the TCTA to make provision relating to VAT
which the Minister considers appropriate in consequence of, or connection with, the
withdrawal of the UK from the EU.

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