VAT

The EU-UK Trade and Cooperation Agreement, now in place, means change. It will require adapting to new trading arrangements, rules and regulations. This information for cross-border SMEs in Ireland and Northern Ireland will outline key areas of change in VAT for various trade routes and includes some useful links

VAT RULES

The Northern Ireland Protocol provides that Northern Ireland will be subject to the same EU VAT rules on goods as EU Member States. 

SERVICES 

The Northern Ireland Protocol states that EU VAT rules on services will not apply to Northern Ireland.

Vat status

Whilst Northern Ireland maintains alignment with the EU VAT rules for goods it will remain part of the UK’s VAT system.

Trade Routes 

Trade between Ireland and Northern Ireland

Supply of Goods

The Northern Ireland protocol will apply to supplies of goods between Northern Ireland Ireland.

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 Northern Ireland to Ireland.

Northern Ireland 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).

Ireland businesses moving and supplying goods to Northern Ireland will be required to report details of trade with Northern Ireland on the Intrastat system (subject to the threshold limits) and VAT Information Exchange System (VIES).

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.

September 2021 Update: Changes were introduced in respect of the movement of goods from Northern Ireland to the EU and imports of low value goods into the EU or Northern Ireland came into force on 1 July 2021. There is a new opt-in One Stop Shop (“OSS”) quarterly VAT reporting and payment systems for distance selling and an Import One Stop Shop (“IOSS”) monthly VAT reporting and payment systems for imports. This means that businesses which fall into the scope of these new rules are no longer required to VAT register in each of the EU member states of their customers. A business opting to register for OSS is able to do so once in any EU member state or in the UK, provided that it is VAT registered in the EU member state or is trading with the EU under the Northern Ireland Protocol.

Supply of Services

The Northern Ireland Protocol will not apply to the supply of services and Northern Ireland will follow all UK VAT rules relating to services. Most services supplied between Northern Ireland 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 Ireland) 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 Ireland 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. The current VAT treatment on other supplies of services between Ireland and Northern Ireland is not expected to change however guidance may be issued by both tax authorities and further changes may arise.

Trade between GB and Northern Ireland

Supply of Goods

The Northern Ireland Protocol will apply to the supply and movement of goods between Northern Ireland to GB and GB to Northern Ireland.

Click here to access HMRC’s policy paper setting out how VAT rules will apply to movement of goods between GB and Northern Ireland. VAT will continue to be accounted for by the supplier as it currently is on goods supplied between Northern Ireland to GB and GB to Northern Ireland.

Registering for VAT: VAT on goods sold between GB and Northern Ireland, VAT on goods sold from GB, transported via Northern Ireland, to an EU member state, If goods are located in GB at the point of sale, if goods are located in Northern Ireland at the point of sale, VAT on goods sold to GB from an EU member state via Northern Ireland, Businesses moving their own goods from GB to Northern Ireland, Businesses moving their own goods from Northern Ireland to GB. Sales of goods from GB 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 GB, Sales of goods on board ferries between GB 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 Northern Ireland, however, a business will not be required to account for VAT on the movement of own goods from Northern Ireland 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 Northern Ireland 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 Northern Ireland, VAT should be accounted for in the same way as a movement of own goods. In order for domestic supplies of goods in Northern Ireland 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 Northern Ireland. 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.

September 2021 Update: GB businesses that are not VAT registered in the UK but are registered for IOSS are able to report their IOSS number to HMRC prior to moving goods to Northern Ireland but are not required to charge VAT on these supplies to customers in Northern Ireland. GB business not registered for IOSS should continue to use the existing VAT treatment or supplies of goods to Northern Ireland. Online marketplace liability does not apply in relation to GB businesses that make sales of goods to Northern Ireland customers. To access the policy paper on the EU VAT e-commerce package, click here. Further information about the UK’s existing scheme can be found here.

Northern Ireland 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 Northern Ireland will be required to report details of trade with Northern Ireland 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 Northern Ireland. Click here to check if you are trading under the Northern Ireland protocol.

Supply of Services

The Northern Ireland Protocol will not apply to the supply of services and Northern Ireland will follow all UK VAT rules relating to services, 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 Ireland 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. The current VAT treatment on other supplies of services between Ireland and Northern Ireland is not expected to change.

Trade between GB and Ireland

Supply of Goods

The movements of goods between Ireland and GB will be treated as exports and imports for VAT purposes.

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 Ireland and GB. Therefore, supplies and movement of taxable goods between Ireland 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.

Ireland 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 Ireland/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.

September 2021 Update:  A business not established in the EU or Northern Ireland wishing to register for IOSS is able to do so in any EU member state or in the UK. Further guidance from HMRC on this should be made available. To access the policy paper on the EU VAT e-commerce package, click here. Further information about the UK’s existing scheme can be found here. HMRC confirmed that postponed VAT accounting is available permanently. A checklist has been provided by HMRC to help navigation, and the details you may need to complete you customer declaration using CHIEF have been updated. Click here to check when you can account for import VAT on your VAT return.

Supply of Services

The current VAT treatment of supplies of services between Ireland 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 Northern Ireland for services) has proposed extending the  specified supplies order so that relevant financial supplies to EU counterparties (including Ireland) will give the right to recovery of associated UK VAT on costs after the transition period ends. Ireland 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) 

Supply of Goods

The movements of goods between Northern Ireland 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 Northern Ireland to rest of world and importing into Northern Ireland from rest of world.  Northern Ireland businesses will be issued with a unique Northern Ireland EORI starting with XI. The XI EORI will also be used in respect of making a declaration in Northern Ireland or to get a customs decision in Northern Ireland in respect of GB to Northern Ireland movements.

Supply of Services

The current VAT treatment on supplies of services between Northern Ireland and non-EU countries is not expected to change.

Useful Links 

Revenue is committed to actively engaging with businesses to help in identifying and understanding the potential customs implications of the new trading relationship with the UK.  Seminars and informational videos provided by the Irish Revenue on their Brexit guidance and support.

Irish Revenue’s Brexit homepage with Information about trade facilitation and customs procedures for trade with the UK after the transition period. This includes information on customs declarations, information for trading with Northern Ireland and GB. 

GOV.UK info on VAT on movements of goods between Northern Ireland and the EU, including ow to charge and account for VAT on the movement of goods between Northern Ireland and EU member states (VAT Notice 725).

GOV.UK info on Customs, VAT and Excise UK transition legislation from 1 January 2021. This collection brings together Customs, VAT and Excise EU Exit legislation and Customs notices that have the force of law applicable to UK transition.

General information on the UK’s approach to the Protocol, a 23 page document published by the Cabinet Office in May 2020.

Protocol publication Ireland/Northern Ireland. A 63 page document detailing the revised protocol on Ireland and Northern Ireland included in the Withdrawal Agreement.

We’d love to know if we could improve this information, use the box below to give feedback or request information you’d like to see included.