Brexit Implications - VAT
The UK left the EU on 31 January 2020. The transition period is due to end on 31 December 2021 unless there is an extension. Until that time the existing VAT rules will continue to apply.
The Northern Ireland Protocol is due to take effect from the end of the transition period. Under the Northern Ireland Protocol Northern Ireland will hold a dual position with regard to VAT, customs and the single market. This Protocol will be reviewed by the Northern Ireland Assembly every 4 years.
What does this mean for Northern Ireland?
Northern Ireland will continue to remain part of the UK VAT system and HMRC will continue to be responsible for the operation, implementation and collection of VAT which will not be passed onto the EU.
For services, Northern Ireland will follow UK VAT rules and not EU VAT rules However, EU VAT law will continue to apply in relation to the movement of goods. Therefore, businesses could have to operate a dual set of VAT rules – EU VAT rules for goods and UK VAT rules for services.
The EU are to introduce a special EU VAT identification number for Northern Ireland businesses to enable EU VAT provisions to be correctly applied. This will be in addition to any UK VAT number.
Existing VAT rates will continue to apply in Northern Ireland as for the rest of the UK. However, the UK government will have discretion to apply VAT exemptions and reductions in Northern Ireland. As such, it is possible that in the future the VAT rates applying in Northern Ireland will be different to those applying in the rest of the UK.
Guidance has yet to be issued by HMRC into how the new rules will apply. However, we have set out below a summary overview of the latest interpretation of the proposed new rules. Please note that these are still subject to agreement and as such, may change.
VAT on Goods
After the end of the transition period the following proposed changes will apply:
|
Movement of Goods |
Proposed Changes |
What that means |
|
NI – GB
|
Treated as imports & exports.
|
Import VAT payable. No intrastat reporting.
|
|
NI – ROI |
No change. EU rules relating to cross border supplies & movements continue to apply.
|
Continue to treat as Intra-EU sales/acquisitions. Intrastat reporting continues. 0% VAT on B2B supplies. |
|
NI – Rest of Europe
|
No change. EU rules relating to cross border supplies & movements continue to apply.
|
Continue to treat as Intra-EU sales/acquisitions. Intrastat reporting continues. 0% VAT on B2B supplies. |
|
NI to Rest of world |
No changes will apply. |
Continue to operate as it does presently.
|
|
GB - EU (incl ROI) |
Treated as imports and exports. |
No intrastat reporting. MOSS won’t apply. Import VAT payable. |
VAT on Services
Northern Ireland, together with the rest of the UK, will be considered outside of the EU for service transactions. As such, all service transactions to EU and non EU countries will be treated as third countries for VAT purposes. UK VAT rules will apply after the transition period.
If you have any queries or would like further information on the points outlined in this article, please do not hesitate to contact us.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.