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For our latest Brexit VAT & Customs commentary, click here.

The Brexit transition phase is due to end on December 31. So what does this mean for NI business and what issues should you be considering now? 

Our short series of explanatory videos from our Indirect Taxes expert, Frankie Devlin provides practical, pragmatic insights for business. 

Brexit: Preparing for VAT and Customs Changes

With the end of the transition period fast approaching, Northern Ireland companies need to step up their Brexit preparations now to ensure they have done all they can to continue operating in the new trading environment.

Changes around customs and VAT which will come into effect from 1st January 2021 need particular attention. Although clarity is required from the UK Government on some of the operational detail, there is still a lot businesses can do to prepare.

Companies should understand the movement of goods in their supply chain, the commodity codes which apply to products and the correct tariff rate. They should consider how they will manage the filing of import declarations, whether customs declarations will be carried out inhouse or through an agent and whether their trade relies on EU Free Trade Agreements (FTAs) and whether rules of origin apply.

The VAT and customs implications are dependent on the ultimate destination, as below: 

Goods moving across the island of Ireland and to and from the EU

In this scenario, there are no border checks, no customs declarations and no tariffs. NI remains aligned to EU rules, including VAT rules, and must adhere to all EU standards. For NI goods which transit through GB to get to mainland Europe, there will be a requirement for pre-lodgement declarations. Goods transiting from RoI through NI to access GB may be subject to customs and tariffs.

NI to GB

The UK government has promised “unfettered access” to NI goods moving to GB but the exact definition needs further clarification and the issue of whether goods are “NI qualifying” will be critical.

GB to NI

Under the NI Protocol, EU tariffs may apply to the movement of goods to NI from GB if deemed “at risk” of moving into the EU, or subject to commercial processing in NI, unless a UK/EU FTA is agreed. Duty will be paid by the importer of record. However, if it can be proved goods will stay in NI, a refund may apply.

Goods on this journey will be tracked by the Goods Vehicle Movement Service IT platform. 

NI to RoI to GB

Some NI goods travel through RoI to get to GB. These can move freely from NI to RoI but could be subject to the UK Global Tariff on import into GB, unless declared under transit. 

NI to rest of the world

The UK Global Tariff will apply to the import of goods directly into NI from the rest of world, unless at risk of being subsequently moved to the EU, in which case it is likely that EU tariffs apply. Much will depend on whether an EU/UK FTA is agreed. On imports, postponed VAT accounting on imports will apply.

Goods moving to NI from rest of the world

The UK Global Tariff will apply to the import of goods directly into NI from rest of world, unless the goods are at risk of being subsequently moved to the EU, in which case it is likely that EU tariffs will apply, although much may depend on whether a free trade agreement is ratified between the EU and UK and what the terms of such agreement are. On imports of goods into Northern Ireland it is expected that postponed VAT accounting will apply, as has been announced for the rest of the UK.

Rules of origin

Under the NI Protocol, NI origin goods will be covered by UK trade deals, but the EU would have to agree to amend all their trade deals to include NI goods as EU originating. The current situation is that NI-origin goods will not have access to EU FTAs post transition!

For NI goods going into RoI to produce finished products which are then sold to the Rest of the World, and vice versa, it is unclear whether they will meet EU origin rule requirements.

Given the potential for such wide-ranging changes, NI companies need to act now to make sure they are well prepared for the end of the transition period.

This article first appeared in the Irish News on Tuesday 4 August 2020 and is reproduced here with their kind permission.

Get in touch

To find out more about how KPMG perspectives and fresh thinking on Brexit can help your business or organisation thrive contact Frankie Devlin via this form.

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