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Accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021 (Update November 20, 2020)

Changes made November 20, 2020

New sections:

  • VAT Retail Export Scheme
  • Personal exports of vehicles from Northern Ireland to Great Britain and Fiscal Warehouses.

3 additions to the policy paper:

  • “How VAT will apply for goods imported into Northern Ireland from outside the UK or EU”
  • “How to claim a refund of VAT paid in an EU member state”
  • “Check if you’re trading under the Northern Ireland protocol”.

Comments made Nov 15, 2020

HMRC has released some initial guidance on the application of

  • VAT in NI, and
  • between NI and GB.

Supply of goods

  • Goods sold from GB to NI and from NI to GB will be treated as a UK domestic supply with VAT charged where appropriate.
    • No change versus today: Seller charges VAT, buyer recovers the VAT
    • Exceptions – customer (or importer) is responsible for accounting for the VAT due:
      • Goods declared into a special customs procedure;
      • Goods subject to domestic reverse charge rules; and
      • Goods subject to an Onward Supply procedure – in these circumstances the customer or importer will account for the VAT on their UK VAT return.
  • Transfer of own goods from GB to NI – taxpayer to charge itself VAT
    • From GB to NI: Output VAT will need to be accounted for on the VAT return – this may also be reclaimed as input VAT (on the same VAT return), subject to the normal rules
    • From NI to GB:No VAT will need to be accounted for, unless the goods have been subject to a sale or supply to its customer.
  • Where goods are supplied by members of a VAT group, and those goods move from GB to NI – VAT will now be due in the same way as when a business moves its own goods
  • Where supplies of goods are made between members of a VAT group, and those goods are located in Northern Ireland at the time that they are supplied:
    • these will only be disregarded if both members are established, or have a fixed establishment, in NI
    • if one or both members only have establishments in Great Britain – VAT must be accounted for by the representative member, but may be reclaimed subject to the normal rules
  • It is not clear whether there may be a requirement under EU VAT law for further VAT reporting of the movement of goods to NI from GB as an import into NI.

Supply of Services

  • UK VAT rules will continue to apply.

Taxable person

  • Are members of a VAT group established in NI or just in GB? Taxpayers to assess their establishment status in NI
  • Where goods are supplied by members of a VAT group, and those goods move from GB to NI – VAT will now be due in the same way as when a business moves its own goods
  • Where supplies of goods are made between members of a VAT group, those goods are located in Northern Ireland at the time that they are supplied, and one or both members only have establishments in Great Britain – VAT must be accounted for by the representative member, but may be reclaimed subject to the normal rules.

VAT Registration

  • There will be no requirement for a new VAT registration for sales of goods in Northern Ireland – existing VAT registration will be unaffected.
  • It is unclear what this means for the EU’s announcement that they intend to introduce a special VAT identification number for NI businesses, giving a ‘XI’ country prefix on their UK VAT number, that would be registered in VIES, and a ‘XU’ country code for other UK businesses.

VAT accounting / VAT returns

  • VAT on all sales across the UK, incl. NI, will be accounted for through the UK VAT return.

Update Oct 26, 2020

The Northern Ireland Protocol means that Northern Ireland maintains alignment with the EU VAT rules for goods, including on goods moving to, from and within Northern Ireland. However, Northern Ireland is, and will remain, part of the UK’s VAT system.

UK VAT rules related to transactions in services will apply across the whole of the UK. HMRC will continue to be responsible for the operation of VAT and collection of revenues in Northern Ireland.

Under the obligations in the Protocol, import VAT will be due on goods that enter Northern Ireland from Great Britain. The same will also broadly apply to goods entering Great Britain from Northern Ireland. However, existing flexibilities within the EU VAT rules have been used to ensure that the Government priority to minimise business impacts is met. In particular, Articles 201 and 211 of Directive 2006/112/EC mean that it is for the UK Government to determine important practical details as to how this will operate. Our approach will preserve the integrity of both the UK and EU single markets.

The guidance within this note further outlines how VAT processes will operate between Great Britain and Northern Ireland on goods sold by VAT-registered businesses. This is in line with the UK’s obligations under the Protocol.

Source gov.uk

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