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VAT and duty update on the Northern Ireland position regarding trading in goods

Northern Irelands position regarding trading in goods

The basics

Under the Northern Ireland Protocol, Northern Ireland will continue to follow EU VAT rules for trading in goods.  The existing rules for intra-community movements of goods will, therefore, continue to apply from 1 January 2021.  However, Northern Ireland is and will remain, part of the UK’s VAT system and HMRC will continue to be responsible for the operation of VAT and collection of revenues in Northern Ireland.

The Protocol will specify where VAT is liable on goods and attempt to minimise any changes to VAT procedures, where goods are moving between Great Britain and Northern Ireland.

Preparation

In order to prepare, businesses that trade with Northern Ireland must obtain a new Northern Ireland EORI, prefixed ‘XI’ before 1 January 2021.  This will enable a business to:

  • Move goods between Northern Ireland and non-EU Member States
  • Make a declaration in Northern Ireland
  • Obtain a customs decision in Northern Ireland
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An ‘XI’ prefixed EORI can only be obtained if an EORI prefixed GB is already held.  The ‘XI’ prefixed EORI must be shown on invoices, statistical reporting filings and customs documents, for transactions where goods are supplied to Northern Ireland by VAT registered EU businesses and where there is a sale or movement of goods from Northern Ireland to the EU. 

HMRC has set up an online Trader Support Service (TSS), in order to assist businesses in moving goods between Northern Ireland and Great Britain.  VAT registered businesses located in Northern Ireland will be automatically issued with a new XI EORI.

UK Trader Scheme launched

The New UK Trader Scheme (UKTS) is now available to help ensure businesses will not pay tariffs on the movement of goods from Great Britain to Northern Ireland, where the goods are to remain in the UK customs territory.  Businesses can self-declare goods not ‘at risk’ of entering the EU (see below), so they do not become subject to duty.

Businesses wanting to declare goods not ‘at risk’, must apply for authorisation by 31 December.  This can be done at the following link:

Treatment of sales and deliveries of goods

Where there is a sale of goods between Great Britain and Northern Ireland, this will continue to be treated as a UK domestic supply and VAT should be charged.  Technically sales from Great Britain to Northern Ireland and vice versa will be treated as imports and exports.

Goods moving between Ireland and Northern Ireland, will continue to be treated as a movement within the EU and will therefore remain as an intra-community zero-rated transaction.

Similarly, business to consumer sales from Northern Ireland to the Republic of Ireland (or elsewhere in the EU), will remain subject to the distance selling threshold and will be subject to the VAT rate in the recipient’s country, above this threshold, at least until the new EU e-commerce package is introduced on 1 July 2021.

In terms of customs duties, no duty will be due on goods imported into Northern Ireland from the EU, or moved from Great Britain to Northern Ireland, that are not deemed ‘at risk’ of being onward delivered to an EU destination.  Duty will be charged on goods delivered to Northern Ireland from Great Britain that are deemed ‘at risk’ of being onward delivered to the EU, or which are non-domestic goods.

Duty will also apply to goods delivered from Northern Ireland to Great Britain, that are not ‘Qualifying Northern Ireland Goods’, or where they are ‘Qualifying Northern Ireland Goods’, but have been delivered for the purpose of avoiding customs duties.

As is currently the case, imports to Northern Ireland of rest of the world goods, will be subject to duty.

Qualifying Northern Ireland Goods

‘Qualifying Northern Ireland Goods’ are defined as goods which are processed in Northern Ireland using components which are in UK free circulation, or which are located in Northern Ireland and are not subject to any customs supervision, restriction or control.

Movement of goods in general

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As far as we currently understand it, the new rules will mean that declarations will be required from businesses moving goods from Great Britain into Northern Ireland, that will include a summary declaration when goods arrive, for all goods sent from Great Britain to Northern Ireland.  Import VAT will apply to goods that enter Northern Ireland from Great Britain, albeit accounted for in the VAT return.  The same will also broadly apply to goods entering Great Britain from Northern Ireland. 

HMRC are to produce guidance on this shortly to confirm the position of goods being traded and the movement of own goods and this note will be updated accordingly.

VAT grouping will continue to apply where a group contains members in Great Britain and Northern Ireland.  However, the movement of goods between VAT group members from Great Britain to Northern Ireland must be as above for movement of own goods.

In summary, what must businesses do?

Businesses should register for TSS and understand how it should be used and how it can assist Northern Ireland established businesses with trading in goods from 1 January 2021. 

From 1 January 2021, when a business trades goods with the EU from Northern Ireland, it must:

  • Show a ‘XI’ prefix in front of its VAT number when communicating with an EU customer or supplier, including on invoices, in place of GB
  • Complete an EC Sales List if selling goods from Northern Ireland to VAT registered customers in the EU

The following link provides useful training on all goods trading matters related to Northern Ireland: https://www.nicustomstradeacademy.co.uk/

Other implications

In addition to the above, the following will also apply:

  • Under the unique arrangements of the Protocol, Northern Irish businesses will continue to benefit from continued access to the EU cross-border VAT reclaims electronic portal
  • The VAT Retail Export Scheme, where currently offered by Northern Ireland retailers, can continue to be operated

Please note that services to or from Northern Ireland are not in the scope of the Protocol.

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