Ashley Fox | European Parliament audiovisual
Ashley Fox, who is the Tory leader in the European Parliament, said the plans are "practical, achievable and allow room for creative negotiation".
The UK position paper suggests an interim, time limited customs union between the UK and EU from March 2019, during which current arrangements would be maintained to avoid disruption to businesses on both sides of the Channel.
Two long term options are suggested; a streamlined customs arrangement keeping trade as frictionless as possible, or an entirely new customs partnership with the EU - negating the need for a customs border.
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The plan would mean businesses in both the UK and the EU would have to adapt to new procedures only once - the UK would formally leave the EU's customs union but seek to negotiate a temporary customs union.
Whether or not the arrangement will allow the UK to negotiate new free trade agreements with third countries will be decided in negotiations.
Brexit Secretary David Davis suggested that the UK could make payments to the EU in return for the temporary customs arrangement, but said that he would bring to an end to payments in the long-term.
Davis said, "The united desire to avoid unnecessary disruption or a disorderly exit for the United Kingdom from the European Union is a strong foundation for the negotiations."
Reacting to the plan, Ashley Fox said he believes the proposals will reassure business and provide a clear starting point for talks.
"This paper removes any lingering uncertainty about what the UK is seeking to achieve," he said.
"There is significant common ground between ourselves and our EU partners on this issue and I am sure the ideas will be welcomed in Brussels.
"These are our suggestions for how we might proceed. They allow space for creative negotiations to take place in the coming months over how to secure the free flowing trade that is in all our interests.
"We are breaking new ground and it would be wrong at this stage to narrow down the options for how the UK and EU can co-operate to achieve that goal."