View from Brussels - January 2021

The impact of the Christmas Eve agreement on FLA markets remains unclear. In practical terms, cars on finance which are illegally transported to the EU will still be reported to the UK authorities. This is a positive development even though the turnaround will be slower. However, finance companies may be charged VAT in the country where the car is repossessed as well as in the UK though this is expected to be recoverable in most cases. Other issues to be ironed out relate to the VAT treatment of cross-border movement of vehicles with Northern Ireland. We’ve had confirmation from the Irish Republic that tariffs will be charged on cars leased in Northern Ireland which are sold on the Irish market.

The Trade and Cooperation Agreement put the UK electric vehicle (EV) market on notice that its supply chain must be home-grown or sourced from the EU by the end of 2026 if tariffs were to be avoided. The news last week that Nissan is shifting EV battery production to its Sunderland plant as it rolls out its popular Leaf model is therefore welcome. It remains to be seen how other non-European manufacturers will adapt.

The big unknowns are the future financial services relationship and the nature of rules governing data transfer. The two sides pledged to resolve the former by the end of March. The UK has put in place the enabling infrastructure for equivalence arrangements so the delay appears to be in Brussels though to their credit they did put in place temporary measures in respect of clearing houses.

The UK Government is confident that data adequacy will be agreed on the basis that it has implemented the GDPR. This is the standard approach taken with third countries under which the European Commission determines whether data protection of EU citizens is sufficiently safeguarded. However an ECJ ruling last year called into question the UK national security agencies’ powers under the  Investigatory Powers Act to “harvest” people’s information, which it regards as contrary to the bloc’s fundamental rights. Data adequacy arrangements are scheduled to be finalised by the end of April 2021 with the possibility of a two month extension.

For the foreseeable future an element of uncertainty will hang over relations, but the future pathway has become clearer.

Published 25 Jan 2021