In March 2018, the European Commission took the first steps towards infracting the UK, alleging that between November 2011 and October 2017, the UK had failed to prevent undervaluation fraud involving importations of Chinese textiles and footwear. On 8 March 2022, the Court of Justice of the European Union (CJEU) published its judgment, finding against the UK on most liability points.
The UK has argued throughout the case that it took appropriate steps to counter the fraud in question. However, since these infringement proceedings were raised, the UK has taken proportionate and increased steps to combat this fraud without impacting legitimate trade, including by liquidating suspect traders through enforcement action. The UK takes a comprehensive and dynamic approach to tackling customs fraud risk and evolves its responses as any new potential threats emerge.
Whilst the UK has now left the European Union and this is a legacy matter from before our departure, the Government are keen to resolve this long-running case once and for all and are committed to fulfilling their international obligations.
Throughout this process, the Government have also been conscious of the risk of further protracted legal proceedings, which could open UK taxpayers to not only a larger principal bill, but also continued substantial interest accrual. Considering this, in June 2022 the UK took the proactive step of making a payment of €678,372,885.63, which the then Chief Secretary to the Treasury set out in a statement to the House on 30 June (HCWS167). This represented the minimum, indisputable amount the UK considered due at that time in light of the CJEU judgment and, vitally, stopped interest accruing on this portion of the bill.
Following further discussions with the European Commission, on 13 January 2023, the UK made a final principal payment to the EU of €700,351,738.31. This constitutes the entire remaining principal due and the figure paid reflects the 12.43% share back that the UK is entitled to from its time as a member state.
On 6 February 2023, the UK made a final payment to the EU of €1,227,884,519.53, representing the interest due on the principal amounts paid. These are substantial sums but represent the final payments and draw a line under this long running case, with the UK fulfilling its international obligations.
Now that the UK is no longer part of the EU customs union, we do not have to remit any duties to the European Union, a tax that in 2021-22 represented a £4.9 billion contribution to the Exchequer. Outside the EU, we can set our own law, including tax and trade policies, that work for the UK. Furthermore, taking into account the financial settlement with the EU, the Government have determined how an additional £14.6 billion of spending by 2024-25 can be allocated to its domestic priorities, rather than be sent in contributions to the EU. This additional spending was already included in the overall spending plans that the Government set out at previous spending reviews.