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European Scrutiny Committee reports on UK-EU Joint consultative working group and VAT in Northern Ireland


Source EY:

In its latest report the European Scrutiny Committee (Committee) has considered recent draft EU legislation and policy documents deposited in Parliament by the Government.

The Committee highlights the importance of several documents, and how it intends to follow up with Government. These include:

Northern Ireland Protocol: Joint Consultative Working Group

  • It details how the UK will be kept informed about planned EU laws that will affect Northern Ireland in the future, and how the UK and EU will discuss the implementation of laws covered by the Ireland/Northern Ireland Protocol.
  • The Government commits to working with the Westminster and Northern Irish Parliaments, and the Northern Ireland Executive, on future arrangements for governance of the Withdrawal Agreement. As the UK is no longer part of the EU’s law-making process, the Withdrawal Agreement provides for the establishment of a Joint Consultative Working Group (JCWG) to allow discussions on laws relevant to Northern Ireland.
  • In correspondence with the Committee, the Chancellor of the Duchy of Lancaster, Michael Gove MP, confirms that officials from the Northern Ireland Executive will be invited to participate on the JCWG and argues that it provides a formal opportunity for the UK to influence EU law.
  • The Committee welcomes the Chancellor’s commitment to parliamentary oversight of implementing the Withdrawal Agreement and the Protocol, including the work of the JCWG, but asks him to justify his assertion that the JCWG will be a forum for the UK to influence EU law. The Committee has also suggested a series of measures that would improve the transparency of the JCWG’s work.

Northern Ireland Protocol: EU VAT identifier for businesses

  • An EU proposal for a specific geographic VAT identifier code for business in Northern Ireland (XI) trading goods with the EU, which will remain subject to EU VAT law on goods under the terms of the Northern Ireland Protocol.
  • The Committee has written to the Government requesting further information on its position on the EU proposal and any alternatives it has put forward; with confirmation that the Ireland/Northern Ireland Specialised Committee had agreed “on the process for identifying Northern Ireland traders for VAT purposes and enabling them to reclaim VAT through existing IT databases when trading in goods with the EU”.

Other outstanding VAT questions and issues include:

  • The Treasury has previously hinted that it does not necessarily consider areas of EU VAT law which apply equally to the provision of goods and services to fall within the scope of the Protocol, which raises the question, for example, of whether the EU’s minimum VAT threshold for small businesses will continue to apply in Northern Ireland. It does not appear that the EU shares this interpretation, but no further clarity has been provided. The Treasury has, to date, also been unable to confirm whether the UK-specific exemptions with respect to VAT rates, such as the zero-rating for most foodstuffs which the Government negotiated while the UK was still a Member State, will continue to apply in Northern Ireland under the Protocol.
  • Given the complexity of EU VAT law, and the unprecedented separation of its application to ‘goods’ and ‘services’ that the Protocol requires for Northern Ireland, it is highly likely there are other difficulties and ambiguities that need to be resolved of which the Committee are not yet aware. The Government should issue further guidance on the practical consequences for the VAT system of Northern Ireland as soon as possible and considering its discussions with the European Commission on implementation of the Protocol.
  • Continued vigilance on the part of Parliament will be required with respect to future changes to EU VAT legislation that may affect Northern Ireland. In particular, the EU is currently considering various proposals for far-reaching reform of its VAT rulebook — with respect to minimum rates for specific products and the VAT treatment of cross-border supplies and purchases of goods — which would also have implications for Northern Ireland under the Protocol.
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