Brexit Secretary David Davis has written to Theresa May to tell her that her new customs plan is unworkable.
Details of May's new proposal are starting to emerge ahead of its official unveiling tomorrow at Chequers, when key ministers will meet to discuss the new plan.
The Prime Minister will be looking for a unilateral agreement within her party before delivering the proposals to Brussels.
The new proposal, known as the facilitated customs arrangement, would allow the UK to set its own tariffs on products coming into the UK.
Technology would be used in the form of tracking devices to determine the destination of the goods, and where they would end up, which would decide whether UK or EU tariffs should be paid.
However, Davis has written a letter to May stating that the new plan holds similarities to an idea that the EU has already rejected.
In a report in The Daily Telegraph, Davis warned that the plans the Prime Minister is intending to show will hit a wall because it is simply a customs partnership – which has already been rejected by the EU – with some additional technological elements.
It is reported that Davis is frustrated that the Prime Minster and her chief negotiator Olly Robbins are refusing to accept the EU’s stance on this position, which would set the UK up to fail.
A Department for Exiting the European Union source said: "David Davis is working closely with the Prime Minister ahead of Chequers."
The Brexit Secretary was not present during Prime Minister’s Questions on Friday, instead opting to work in his Whitehall office as he drafted up more Brexit negotiations.
The White Paper is expected to be published in full next Thursday, which will outline the government’s plans for Brexit, but will not feature the government’s full immigration policy.
Negotiations between the EU and the UK only have six weeks remaining before the two sides have to strike a deal.