Speaking while on a trade mission in China, Mr Hammond was asked whether firms should expect a transition deal where the United Kingdom is still participating in the single market, customs union and subject to the European Court of Justice.
While on a trade visit to China, Philip Hammond was asked whether the United Kingdom would remain under the control of the European Court of Justice and participate in the single market and customs union, despite not having membership or a role in decision making.
It also emerged that the prime minister was applauded by European Union leaders as they gave the green light for the next stage of talks during a dinner on Thursday night.
Hammond, in China on a trade mission, was asked whether firms should expect a transition deal under which the United Kingdom was still participating in the single market, customs union and subject to the European court of justice (ECJ).
The latter will be the legally binding basis of the treaty that must be put to all member states for approval ahead on the March 2019 United Kingdom departure from the union.
Several reports on Friday revealed that 10 Downing Street is ready to support an amendment to the Brexit Bill next week, which will give MPs the "power to amend the definition of exit day" to a later date, Sky News reported.
A day after European Union leaders agreed that "sufficient progress" had been reached for Brexit talks to advance from divorce terms to the future relationship between London and Brussels, Hammond said the United Kingdom had already made undertakings that meant there would be little change on trade.
"But we're committed, as a result of the agreement we've made this week, to creating an environment which will effectively replicate the current status quo so that businesses can carry on trading with their commercial partners across the European Union, as they do now".
On Friday, the European Union published a document which set out the process of agreeing the terms of transition, which made clear the United Kingdom will be expected to observe all of its rules during the two year period.
However, the restrictions imposed by the EU's position were rejected by Tory Jacob Rees-Mogg, who said Mrs May must not agree to them.
The talks starting in the new year will involve wide-ranging discussions on the future relationship between Britain and the 27 remaining European Union nations, including trade.
"That is not leaving the European Union, that is being a vassal state of the European Union, and I would be very surprised if that were Government policy".