UK negotiators also told the EU that London wants to solve the Irish border issue as part of the overarching EU-UK future relationship deal, but the EU has said - again - that would not be possible.
According to the document, given to the EU negotiators and cited by the BBC, the exclusion would hamper the UK-EU work and effective security cooperation after London's leaving the Union in March 2019.
"Given that ministers are indicating that neither of the two options being discussed are likely to be ready by December 2020, when the transition period ends, the United Kingdom will in all likelihood have to remain in a customs union with the EU until alternative arrangements can be put in place".
The EU has long threatened to block talks on trade and citizens' rights until the bill is agreed.More news: U.S. judge orders 30yo to move out of parents' home
Downing Street insisted that Parliament would vote on the withdrawal deal along with "the terms of our future relationship".
Theresa May wants to resolve the issue through a special customs agreement for the whole of the United Kingdom that would render border checks unnecessary. "It is more than just words and I think it does apply to the attitude in the way in which an agreement on the future framework will be struck".
"The Tories have agreed to pay tens of billions for a worse deal than we have now and without having any guarantees about what we will get for it in return".
The UK central bank's current projections are based on a smooth transition when Britain leaves the European Union, he said in a speech on Thursday, before warning that "a sharper Brexit could put monetary policy on a different path".More news: Trump brands latest attempt to discredit Russian Federation investigation 'spygate'
Hilary Benn, the committee chairman, said: "We are rapidly running out of time to get new trade and customs arrangements in place".
Labour MP Pat McFadden asked her: "Isn't it the case that the financial settlement which we are going to be asked to vote on in October, we will be asked to vote on that before we have a legal treaty before us on the future relationship?"
The plan, also known as "max fac", is one of two options under consideration by the Cabinet and a model favoured by Brexiteers.
The move followed reports that a senior European Union official insisted Britain must accept the "consequences" of its decision to quit the bloc and abandon the "fantasy" that things would remain the same.More news: Air Force delays launch as it reviews SpaceX rocket