Northern Ireland's Democratic Unionist Party says it cannot supportby Prime Minister Boris Johnson and the European Union.
"As things stand, we could not support what is being suggested on customs and consent issues and there is a lack of clarity on VAT," DUP leader Arlene Foster and deputy leader Nigel Dodds said on Thursday.
"We will continue to work with the government to try and get a sensible deal that works for Northern Ireland and protects the economic and constitutional integrity of the United Kingdom."
Northern Ireland Democratic Unionist Party leader Arlene Foster. Source: AP
EU and UK negotiators had worked late into the night on a compromise withdrawal deal that Mr Johnson hoped to present to his counterparts.
But, as dawn broke over Brussels, Northern Ireland's Democratic Unionist Party dramatically rejected the accord, which would see their British-ruled province remain under EU customs and Value Added Tax rules.
The support of the DUP, which backs Mr Johnson's government, is crucial as some hardline Brexiteers in his party say they will be swayed by its stance on the 
The British PM has no majority in the 650-seat parliament and needs 320 votes to get a deal ratified.
Brexit supporters in favour of leaving the European Union protest opposite the Houses of Parliament in London. Source: AAP
The DUP holds 10 votes.
Before the DUP statement, there had been guarded optimism that this time, just two weeks before Britain is due to quit the bloc, the groundwork was there for a deal to avoid calamitous economic disruption.
"An agreement appears within reach but it is not guaranteed," French deputy foreign minister Jean-Baptiste Lemoyne said.
"We're hoping for a deal and if it can come in the coming hours, that would be perfect."
Under the measures to replace the so-called "Irish backstop" in the previous failed agreement, the plan would see Northern Ireland remain British legal territory but trade under EU regulations.
This is intended to prevent the return of a hard border with EU-member Ireland but, because it would involve some customs and tax checks with the rest of the UK it raised the hackles of the pro-British DUP.
EU negotiator Michel Barnier said late Wednesday that there had been "good progress, and work is ongoing" as he briefed a late-night gathering of leading MEPs on the eve of the summit.
But one EU source told AFP that the putative agreement "is politically fragile in London" because of Mr Johnson's reliance on votes from the DUP and hardline Conservative eurosceptics.
British Prime Minister Boris Johnson. Source: Getty Images
And there was scepticism that a final legal text could be completed before the end of the summit, although leaders may give political approval to open the way for a binding agreement to be finalised in the weeks to come.
The leaders also hope the summit will rise above the Brexit mire and focus on the EU budget debate, bids by North Macedonia and Albania to start talks to join the bloc, and the crisis in relations with Turkey.
