On 24 December 2020, the European Union and the United Kingdom reached an agreement in principle on the EU-UK Trade and Cooperation Agreement.
This VAT section will outline key areas of change for the Cross-Border Trader under various Trade Routes, it will provide you with some useful links and further below you can also find a VAT factsheet.
- Mapping your supply chain will be important as there may be changes to your treatment of VAT either in the supply of goods and or services depending on which jurisdiction your trade is in.
- The NI Protocol provides that Northern Ireland will be subject to the same EU VAT rules on goods as EU Member States after the transition period.
- The NI Protocol provides that EU VAT rules on services will not apply to Northern Ireland after the transition period.
- Whilst NI maintains alignment with the EU VAT rules for goods, including goods moving to, from and within NI it will remain part of the UK’s VAT system.
The NI protocol will apply to supplies of goods between NI and the EU (including ROI). From 1 January 2021, the current VAT treatment on the supply of goods, as well as the intra-community supply and acquisition of goods rules, will still apply when moving goods from NI to ROI. EU businesses supplying and moving goods to NI after the transition period will also follow the same intra-community rules that currently apply.
- NI businesses will be required to complete EC Sales Lists when selling goods to VAT registered customers in the EU and Intrastat declarations (which are subject to the Intrastat threshold for dispatches and arrivals).
- ROI businesses moving and supplying goods to NI will be required to report details of trade with NI on the Intrastat system (subject to the threshold limits) and VAT Information Exchange System (VIES).
- Click here for HMRC’s guidance on Intrastat declarations and here for the Irish Revenue’s guidance on VIES and Intrastat.
- There will also be a requirement to put an “XI” prefix in front of your VAT number on your invoices if moving goods from NI to EU and to provide your XI prefix in front of your VAT number when communicating with suppliers moving goods from EU to NI. Click here to check if you are trading under the NI protocol.
The NI Protocol will not apply to the supply of services and NI will follow all UK VAT rules relating to services. Most services supplied between NI and the EU should not see significant changes for most sectors in respect of legislation and guidance, however, there may be some changes in terminology and invoice references. Further guidance is expected from the UK and EU on some of these issues.
Significant changes are expected in respect of the place of supply rules in relation to financial services. The UK has proposed to extend the specified supplies order so that relevant financial supplies to EU counterparties (including ROI) will give the right to recovery of associated UK VAT on costs after the transition period ends, although this may depend on the outcome of UK-EU negotiations. However, if this is legislated for in the UK, it is likely that ROI will introduce similar rules for VAT on financial services.
It is also expected that the “use or enjoyment” rules relating to place of supply of services will change in respect of both the UK and the EU . This is assuming the Cross Border Taxation 2018 Act is adopted unchanged. Click here to access current HMRC’s guidance on use and enjoyment rules. The current VAT treatment on other supplies of services between ROI and NI is not expected to change.
- Click here to access the place of supply rules for services outlined by the Irish Revenue.
- Click here to access the place of supply of services outlined by the HMRC’s VAT notice 741a .
Further guidance may be issued by both tax authorities and further changes may arise.
Northern Ireland/Great Britain
The NI Protocol will apply to the supply and movement of goods between NI to GB and GB to NI.
- Click here to access HMRC’s policy paper setting out how VAT rules will apply to movement of goods between GB and NI . VAT will continue to be accounted for by the supplier as it currently is on goods supplied between NI to GB and GB to NI. This link will cover the following topics :-
Registering for VAT, VAT on goods sold between Great Britain and Northern Ireland, VAT on goods sold from Great Britain, transported via Northern Ireland, to an EU member state, If goods are located in Great Britain at the point of sale ,If goods are located in Northern Ireland at the point of sale, VAT on goods sold to Great Britain from an EU member state via Northern Ireland, Businesses moving their own goods from Great Britain to Northern Ireland, Businesses moving their own goods from Northern Ireland to Great Britain. Sales of goods from Great Britain to Northern Ireland, and within Northern Ireland, by members of a UK VAT group, VAT Retail Export Scheme. Personal exports of vehicles from Northern Ireland to Great Britain, Sales of goods on board ferries between Great Britain and Northern Ireland, Adjustments to input VAT on businesses moving their own goods, Intra-EU simplifications. Margin Scheme, Fiscal Warehouses.
- VAT will also have to be accounted for when a business moves its own goods from GB to NI, however, a business will not be required to account for VAT on the movement of own goods from NI to GB unless the goods are subject to an onward sale to its customer in GB.
Exceptions to these rules will apply whereby the customer/importer will account for VAT in its UK VAT returns in certain cases. These include movements of goods between GB and NI declared into a special customs procedure, supplies currently subject to domestic reverse charge rules, or supplies subject to onward supply procedures. Click here to access HMRC’s current manual on place of supply of goods.
- Where goods are sold between members of a UK VAT group, and those goods move from GB to NI, VAT should be accounted for in the same was as a movement of own goods. In order for domestic supplies of goods in NI to be disregarded for VAT purposes when sold between members of a VAT group, both entities must be established, or have a fixed establishment in NI. Where one or both members only have establishments in GB, VAT must be accounted for on the supply. To get further advice customs requirements on moving goods between Great Britain and Northern Ireland sign up here for the Trader Support Service.
The current VAT treatment of supplies of services between GB and NI will not change as it’s not covered by the NI Protocol. As such, NI will follow UK VAT rules for services and the normal UK place of supply of service rules will continue to apply . Click here to access HMRC’s VAT notice 741a on the place of supply of services.
The movements of goods between ROI and GB will be treated as exports and imports for VAT purposes.
The Brexit Omnibus Bill introduced postponed accounting VAT for all importers registered for VAT in ROI. Postponed VAT accounting for imports would eliminate the VAT cash flow cost of imports resulting in a significant VAT cash flow benefit for traders.
The UK announced that it intends to introduce postponed VAT accounting in respect of all imports into the UK from both EU and non-EU countries from 1 January 2021 for businesses that are VAT registered in the UK.
- Click here for more information from HMRC. From 1 January 2021, you must continue to submit UK Intrastat arrival declaration for goods you import from the EU (including ROI) into GB until 31 December 2021. You will no longer need to submit an Intrastat declaration for goods you export from GB to the EU as outlined in the HMRC notice 60.
If you trade with GB after the transition period, the rules of trade with a non-EU country will apply between ROI and GB. Therefore, supplies and movement of taxable goods between ROI and GB will be subject to the VAT rules on exports and imports. Also, you will no longer have to report details of trade with GB on the Intrastat system or VIES. Intra-EU rules and simplifications, such as triangulation, will no longer apply to sales in GB.
- ROI businesses may be required to register for VAT in GB as outlined in the Irish Revenue’s guidance on the VAT implications of trade with GB.
From 1 January 2021, you will need an EORI number to move goods between ROI/EU and GB.
- For GB businesses, you’ll need an EU EORI number if your business will be making declarations or getting a customs decision in the EU. You can get this from the customs authority in the EU country where you submit your first declaration or request your first decision. Click here to access HMRC’s guidance on EORI numbers.
The current VAT treatment of supplies of services between ROI and GB will not change.
- Click here to access HMRC’s VAT notice 741a on the place of supply of services
- Click here to access the place of supply rules for services outlined by the Irish Revenue.
The UK (which includes NI for services) has proposed extending the specified supplies order so that relevant financial supplies to EU counterparties (including ROI) will give the right to recovery of associated UK VAT on costs after the transition period ends. ROI and the EU may also decide to change its rules in the same way, but this is to be confirmed.
Northern Ireland/Ireland/ Rest of World (Non-EU Countries)
The movements of goods between NI and the rest of the world will be treated as exports and imports for VAT purposes. From 1 January 2021, you will need an EORI number that starts with XI to export goods from NI to rest of world and importing into NI from rest of world. NI businesses will be issued with a unique NI EORI starting with XI. The XI EORI will also be used in respect of making a declaration in NI or to get a customs decision in NI in respect of GB to NI movements.
- Click here to access HMRC’s guidance on EORI numbers.
- Click here to access HMRC’s manual on place of supply of goods.
- Click here to access HMRC’s policy paper outlining how VAT will apply to goods imported into NI from non-EU countries.
The export/import treatment for movement of goods between Ireland/EU and rest of the world have not changed and more information can be found below.
- Click here to access Irish Revenue updates on VAT payments for Imports and Exports outside of the EU.
- Click here for seminars and informational videos provided by the Irish Revenue on their Brexit guidance and support.
- Click here for the Irish Revenue’s Brexit homepage.
- Click here for GOV.UK info on VAT on movements of goods between Northern Ireland and the EU.
- Click here for GOV.UK info on Customs, VAT and Excise UK transition legislation from 1 January 2021.
- Click here for more general information on the UK’s approach to the Protocol.
- Click here to read on the Protocol publication Ireland/Northern Ireland.
For the VAT factsheet see below.