Senior Conservatives have signalled they are not prepared to support a no-deal Brexit as they inflicted a defeat on the government in Parliament.
MPs backed an amendment to the Finance Bill, which would limit the scope for tax changes following a no deal unless authorised by MPs, by 303 to 296 votes.
Twenty Tories rebelled and, while its practical effect will be limited, Labour said it was an “important step”.
But Brexiteers said the UK would leave the EU on 29 March, come what may.
Before the vote, No 10 said a defeat would be “inconvenient rather than significant”, with experts pointing out there were other mechanisms available to government to raise money.
Former cabinet ministers Michael Fallon, Justine Greening, Dominic Grieve, Ken Clarke and Sir Oliver Letwin were among the 20 Conservative MPs who defied the government by backing a cross-party amendment tabled by Yvette Cooper.
Sir Oliver, a government loyalist who has never previously rebelled over Brexit, said he wanted to send a message to opponents of Theresa May’s Brexit deal, to be voted on next week.
“I want to make it abundantly clear to my honourable friends who are voting against the prime minister’s deal, which I shall be supporting, that the majority in this House will not allow a no-deal exit to occur on the 29 March.