Six things to know about VAT rules for Great Britain-Northern Ireland trade from 1 January 2021

Mon 23 Nov 2020
Posted by: Noelle McElhatton
Trade News

The UK government has announced key changes to VAT that impact trade in goods between Great Britain and Northern Ireland from 1 January 2021, after the UK’s transition from the EU has ended.

A policy paper published last week set out the changes as well as those procedures that remain in force as part of new trading rules resulting from the Northern Ireland Protocol.

Application of the Protocol means that UK authorities apply will EU customs rules to goods entering Northern Ireland. This entails some new administrative process for traders, including around VAT as it relates to goods moving from GB to NI.

VAT procedures staying the same

1. Northern Ireland remains part of the UK’s VAT and excise system, and all businesses operating in NI will retain their current VAT registration.

2. VAT payable on sales within NI will be accounted for through the UK VAT return, in the same way as it is done now, using the same boxes on the return.

Changes to VAT rules 

The Protocol means that Northern Ireland is required to continue to follow some administrative processes and rules on goods only (ie not services) within the EU VAT Directive.

3. Businesses moving their own goods between GB and NI (ie intra-company) will have to account for VAT, although this may be recovered as input tax on the same return, subject to the normal rules.

4. For goods moved and sold between GB and NI, HMRC has confirmed that VAT-registered sellers should continue to charge UK VAT on these goods and report this on the VAT return in the usual way.

The exception to this includes goods that are:

1) declared into a particular customs procedure when they enter NI or GB

2) subject to a domestic reverse charge

3) subject to an onward supply procedure. For these exceptions, the importer is responsible for accounting for the VAT due.

5. For goods moving from NI to GB, VAT will need to be accounted for when the goods are supplied to a customer.

6. Where goods are sold from GB and transported via NI to an EU state, eg the Republic of Ireland, the seller will need to account for the import VAT and zero-rating the goods on export to the EU.

The VAT charged will be accounted for as output VAT on the UK VAT return by the seller. The seller will not be able to claim this back as input VAT.

There will be an exception to this rule where goods are declared into a special customs procedure or Onward Supply procedure when they enter NI or before arriving at the first EU member state.