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We have set out below our analysis of the key VAT & Customs changes for businesses operating on the Island of Ireland (both North and South).

Goods trade: Ireland/Northern Ireland

VAT headlines

Northern Ireland will remain part of the UK VAT area but the EU VAT rules concerning goods will continue to apply in Northern Ireland.

The operational aspects of the arrangements will need to be worked out but we expect the current VAT treatment of sales of goods between Ireland and Northern Ireland should continue to apply.

The UK can, however, opt to apply reduced rates of VAT and exemptions that apply in Ireland to goods sold in Northern Ireland. How these optional measures could apply in practice in Northern Ireland remains to be clarified.

Customs headlines

Northern Ireland will remain part of the customs territory of the United Kingdom but EU Customs rules concerning goods shall apply in Northern Ireland.

Northern Ireland will also remain aligned to a limited set of rules related to the EU’s Single Market in order to avoid a hard border on the island of Ireland.

The terms of the revised NI Protocol mean an all-Ireland economy is preserved with no Tariffs, customs controls or border checks applied to the trade in goods between Ireland and Northern Ireland allowing for frictionless trade North/South.

There will be no requirement to file customs declarations to record the movement of goods between Ireland and Northern Ireland.

Goods trade: Ireland/Great Britain

VAT headlines

Sales of goods from Ireland to Great Britain should be treated as exports with no Irish VAT chargeable.

The same rules should apply to the sale of goods from Great Britain to Ireland with no VAT chargeable.

Import VAT will arise on the importation of goods into Ireland from Great Britain. It remains to be confirmed if Ireland would still implement postponed VAT accounting on imports which was to be introduced in the event of a no deal Brexit. Postponed VAT accounting for imports would eliminate the VAT cash flow cost of imports resulting in a significant VAT cash flow benefit for traders.

A similar position will apply in respect of imports of goods into Great Britain from Ireland which will attract import VAT. However, the UK announced in March that it intends to introduce postponed VAT accounting in respect of all imports into the UK from both EU and non-EU countries after the Transition Period ends for businesses that are VAT registered in the UK. These VAT recording requirements will continue to apply to trade between Ireland and Great Britain even if a free trade agreement is reached.

Customs headlines

Customs controls will apply to the movement of goods between Ireland and Great Britain when the Transition Period expires.

After the end of the Transition Period Customs Tariffs will apply to trade between Ireland and Great Britain unless relieved under a free trade agreement. A free trade agreement will only apply to goods of EU or UK origin. For example, it would not remove potential tariffs on goods imported into Ireland from outside the EU which are subsequently sold on to customers in the UK.

Import and export declarations will need to be filed in respect of trade between Ireland and Great Britain after the Transition Period including in a case where a free trade agreement is reached. A free trade agreement will not remove many of the obstacles to frictionless trade associated with Brexit such as customs paperwork and potential regulatory checks.

That said, on 12 June 2020, the UK government announced they will apply import controls for EU goods on a phased basis from 1 Jan 2021 (this is a change from its previous position).

  • From 1 January  2021, customs import declarations and payment of tariffs can be deferred on Standard goods “covering everything from clothes to electronics” until 1 July 2021.
  • There will be checks on and declarations required for controlled goods such as alcohol and tobacco.
  • High risk live animals and plants will not be physically checked at point of import but instead at the point of destination or other approved premises. From April 2021, all products of animal origin and regulated plants and plant products will require pre-notification and health documentation.
  • Full import controls will be applied from July 2021 at which point normal customs declarations and payment of tariffs will be required at import.
  • The UK Government also announced it would remove barriers for customs intermediaries to taking on extra clients by adapting the rules around financial liability. Further details are awaited in respect of this measure, but it is hoped this may mean that where EU traders importing goods into the UK are required to appoint a UK customs representative, this can be done without the requirement for the representative to have joint and several liability for import duties.  This would be a welcome simplification for many Irish exporters who are selling into the UK on a DDP or consignment stock basis.

It is important to note that unless the EU were to reciprocate in respect of imports and exports with the UK, the UK’s announcement does not alter EU customs control procedures. As a result, export declarations will need be filed for goods exported from Ireland to GB and import declarations and payment of tariffs will arise for goods imported into Ireland from GB when the Transition Period ends.

If a free trade agreement is not reached with the EU, the UK’s new Global Tariff Schedule will apply to imports of EU goods into GB from the end of the Transition Period.

Goods trade: Northern Ireland/Great Britain

VAT headlines

The EU have stated in its technical papers that supplies of goods between Northern Ireland and Great Britain will be treated as exports and imports for EU VAT purposes after the Transition Period ends. The operational aspects of the arrangements will need to be worked out and clarification is awaited from the UK Government on how the application of a dual VAT system in NI will work in practice. It is hoped that this will be clarified as soon as possible so that businesses can prepare for any changes.

Customs headlines

As part of the UK Customs area there generally should be no tariffs on goods moving from NI to GB and unfettered access has been promised by the UK Government, however, further clarification will be needed on whether the UK may implement any special rules for certain categories of goods movements to the UK. For example, goods which are not NI qualifying goods that originate from outside of Northern Ireland which are shipped to the UK via Northern Ireland.

It remains to be seen whether exit summary declarations will apply in respect of the movement of goods from Northern Ireland to Great Britain.

However, we understand that there may be a requirement in limited circumstances for pre-lodgments declarations, for example, where goods are transiting from NI through GB and onto the EU. 

In respect of goods moving from GB to NI, it has been confirmed that there will need to be new customs formalities and checks.

HMRC have been developing a new IT platform to track the movement of goods across the Irish Sea and deal with certain customs procedures. We understand the system will be known as the “Goods Vehicle Movement Service” (GVMS) and will be trialed in the next few months. It is unclear if this will operate alongside HMRC’s existing CHIEF and CDS customs declaration systems, or whether GVMS will also facilitate customs declarations on imports into NI.

EU Tariffs may apply to goods brought into Northern Ireland from Great Britain. The Tariffs will apply if there is a risk that the goods will subsequently be moved to the EU. If the goods are not at risk of movement to the EU, then no tariffs should apply.

The NI Protocol says that goods will be at risk of subsequently being moved to the EU unless it can be established that:

  • They will not be subject to commercial processing in Northern Ireland; and
  • The goods fulfil criteria to be established by a Joint Committee, made up of representatives of the United Kingdom and the EU.

If goods can be proven to stay in Northern Ireland, then there are measures to allow for exemptions, or a potential reimbursement of duties paid. The position will also depend on whether a tariff free trade agreement is ratified between the UK and EU.

If the UK agrees free trade agreements with non-EU countries it may be open for Northern Ireland to be part of that agreement.

Goods trade: Northern Ireland/other EU 26 Member States

VAT headlines

The operational aspects of the arrangements will need to be worked out but we expect that broadly the current VAT treatment of sales of goods between Northern Ireland and the other EU 26 Member States should continue to apply.

Customs headlines

As with trade between Ireland and Northern Ireland it is understood the current trading rules between Northern Ireland and the EU should continue with no tariffs and no declarations required on trade between Northern Ireland and the rest of the EU.

Goods trade: Northern Ireland/rest of the world (ex Ireland and Great Britain)

VAT headlines

The operational aspects of the arrangements will need to be worked out but broadly the same VAT treatment applying to imports of goods into Northern Ireland from third countries should continue to apply. There remains a question over whether postponed VAT accounting for import would be introduced in Northern Ireland. 

Customs headlines

UK Tariffs under the UK’s new Global Tariff Schedule will apply to the import of goods directly into Northern Ireland unless the goods are at risk of being subsequently moved to the EU in which case it is understood EU tariffs will apply. Again, the position will also be influenced by whether a free trade agreement is ratified between the EU and UK.

NI-produced goods may have the same access under UK FTAs to other markets as GB lot of unknowns.

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