Policy paper

The Customs (Northern Ireland) (EU Exit) (Amendment) Regulations 2023

Published 8 September 2023

Who is likely to be affected

The Customs (Northern Ireland) (EU Exit) (Amendment) Regulations 2023 will effect UK businesses that are moving goods or parcels from Great Britain into Northern Ireland. It will also affect UK or Crown Dependency businesses claiming a relief from customs duty in respect of goods imported into the UK as a result of their entry into Northern Ireland; or removed to Northern Ireland from Great Britain.

The measure is expected to have a positive impact on Northern Ireland businesses, by expanding the range of goods movements that will not be subject to customs duty and reducing the administrative burden of processes associated with claiming a duty waiver.

General description of the measure

The Windsor Framework is an international agreement between the UK and EU that restores the smooth flow of trade within the UK internal market and safeguards Northern Ireland’s place in the UK.

The measure implements arrangements for goods entering Northern Ireland, provided for by the Windsor Framework. It updates customs duty rules to support the smooth flow of goods within the United Kingdom Internal Market. The measure also updates the arrangements by which customs duty can be waived, in applicable circumstances.

Policy objective

The measure is intended to ensure that a broader range of UK businesses are able to benefit from the Windsor Framework arrangements by expanding the range of goods that can be moved without being subject to customs duties charged in accordance with the EU tariff.

The measure is also intended to ensure that the rules for relief and repayment of duty chargeable in Northern Ireland are clear, and that these relief and repayment arrangements are accessible to UK and Crown Dependency businesses.

It is also intended to make the process of reporting waiver claims easier, by ensuring businesses use a digital platform. This will mean that HMRC can oversee the scheme effectively, and minimise the risk that businesses inadvertently claim waivers in excess of the waiver limit and become liable to repay duty to HMRC.

Background to the measure

The Windsor Framework establishes a new set of arrangements for the movement of goods into Northern Ireland. This includes an expanded trusted trader scheme which, as of 30 September 2023, will enable a much broader range of businesses to declare goods not ‘at risk’ and be relieved of customs duties for internal UK movements.

When the ‘green lane’ is fully implemented from 30 September 2024, those businesses will also be able to benefit from a streamlined set of information requirements, relieving them of full international customs processes such as the requirement for traders to provide customs commodity codes for each movement, and to provide supplementary declarations.

Existing customs legislation refers to a Joint Committee Decision (JCD) made in 2020 (JCD4/2020). JCD4/2020 will be repealed and replaced by Decision No 1/2023 of the Joint Committee (JCD1/2023), agreed as part of the Windsor Framework. This expands the number of goods movements that can be declared as not ‘at risk’ in several ways, including:

1. Businesses can be established anywhere in the UK (JCD 1/2023), rather than just in Northern Ireland (JCD 4/2020).

2. The annual turnover threshold for businesses who move goods into Northern Ireland for the purpose of commercial processing has quadrupled from £500,000 (JCD 4/2020) to £2m (JCD 1/2023).

3. Even if businesses have turnover above that threshold, they will nonetheless be eligible to move goods not ‘at risk’ if those goods are for use in the animal feed, healthcare, construction and not-for-profit sectors, provided that they are for end use in Northern Ireland by the importer or one subsequent entity (JCD 1/2023). Inputs into food production for end use in the UK will also continue to be eligible (JCD 4/2020).

JCD1/2023 also ensures that movements of consumer parcels from Great Britain to individuals in Northern Ireland are always classified as not ‘at risk’. This means that consumer parcels will be able to move with no customs duty required, as now, which will sit alongside a broader set of arrangements to safeguard parcel flows to take effect from 30 September 2024.

For goods movements that cannot be made under the trusted trader scheme, there are a range of alternative options for moving goods at zero duty. This includes using preferential rates in the UK/EU Trade and Cooperation Agreement, making use of existing customs duty reliefs or customs special procedures. Where duty is due, businesses also have the option of claiming a waiver or, if they can show that their goods have not entered the EU, claiming a reimbursement of any EU duty paid using the Duty Reimbursement Scheme recently launched by HMRC.

Most businesses can currently claim duty waivers up to a maximum of 200,000 euros over 3 years, although this threshold is increasing to 275,000 euros in January 2024. This is an important benefit for businesses, however, at present it can be administratively burdensome as they are required to print and post a physical form to HMRC on a quarterly basis to report their claims and keep evidence of these for 10 years. HMRC has now launched a digital platform for businesses to report their claims online, which will make this process more straightforward for businesses.

Detailed proposal

Operative date

A series of elements of JCD1/2023 are due to come into force on 30 September 2023, subject to a series of declarations which are due to be made by the UK and EU in advance. The provision which updates references to JCD1/2023 are intended to have effect at the same time.

The provisions which update relief and repayment arrangements are intended to have effect from 30 September 2023.

Current law

The Taxation (Cross-border Trade) Act 2018 and regulations made under that Act, including the Customs (Northern Ireland) (EU Exit) Regulations 2020 (SI 2020/1605) (Northern Ireland Regulations) set out in domestic legislation the customs duty rules that apply in Northern Ireland.

The Northern Ireland Regulations refers to JCD4/2020, which both sets out:

• the criteria for considering that goods entering Northern Ireland from outside the EU are ‘not at risk’ of subsequently entering the EU
• conditions for considering that goods brought into Northern Ireland from outside the EU will not be subject to commercial processing in Northern Ireland

The JCD4/2020 which is referenced therefore determines that both:

• (in the case of Great Britain to Northern Ireland domestic goods) — whether duty is chargeable under section 40A Taxation (Cross-border Trade) Act 2018 (TCTA)
• (in the case of rest of the world to Northern Ireland goods) — whether duty chargeable under section 30A TCTA is chargeable with reference to the UK or EU tariff

Following agreement of the Windsor Framework, JCD 4/2020 is to be repealed and replaced by a new Joint Committee Decision JCD1/2023, with effect from the date on which the new Joint Committee decision comes into effect.

The Northern Ireland Regulations provides for reliefs and repayments to be available to UK businesses in respect of certain customs duty chargeable in Northern Ireland under Section 40A and Section 30A TCTA. This relief is subject to applicable state Aid de minimis rules, including limits of the amount of aid that can be granted to a single undertaking within three tax years.

The Northern Ireland Regulations specify the eligibility rules that must be met before this relief can be claimed as well as details of how relief may be claimed. They also set out certain requirements upon HMRC to acknowledge each relief claim and concerning the notification by HMRC, within a specified period, of a decision to grant or refuse a claim for relief.

The Customs (Contravention of a Relevant Rule) Regulations 2003 (SI 2003/3113) make provision for penalties for certain breaches of customs rules in relation to these relief and repayment arrangements.

The Customs (Crown Dependencies Customs Union) (EU Exit) Regulations 2019 (SI 2019/385) provide that person established in a Crown Dependency satisfying various eligibility conditions in relation to establishment, where relevant for these relief and repayment arrangements.

Proposed revisions

The measure includes modifications to rules set out in the Northern Ireland Regulations to:

The measure amends the Northern Ireland Regulations to remove references to JCD4/2020 and insert references to its replacement, JCD1/2023, to ensure that new beneficial arrangements, agreed through the Windsor Framework, are implemented in domestic law and the expanded range of goods movements not ‘at risk’ are not subject to customs duty chargeable in accordance with the EU tariff.

The measure makes various amendments to the relief and repayment arrangements in the Northern Ireland regulations to make sure the rules are clear and facilitate the development of a digital platform to make the process of reporting waiver claims easier. This will ensure that HMRC can oversee the scheme effectively and minimise the risk that businesses inadvertently claim waivers in excess of the waiver limit and become liable to repay duty to HMRC.

These changes will include the following:

1. Establishes a new ‘undertaking lead’ function. To apply the existing rules of the scheme across related businesses (such as parent companies and subsidiaries) in a simpler and more consistent way, it will require an undertaking lead (a member of the business authorised to deal with claims on its behalf) to be appointed representing a ‘single undertaking’ (a sole trader, a company, a partnership, or any combination of these that is part of the same business). Any eligible members of the undertaking will retain the ability to make claims. This is consistent with current arrangements, which treat related businesses as a single undertaking for de minimis aid purposes.
2. An undertaking lead will be required to provide information concerning claims made by the single undertaking it represents, via the new HMRC digital platform. This includes amounts of aid claimed by the undertaking under other de minimis state aid schemes. This will ensure that there is appropriate monitoring of the overall aid claimed to avoid breaching relevant limit.
3. In cases where traders have claimed duty waivers in excess of their individual allowance, the measure enables HMRC to recover these amounts (including, if relevant, from other linked businesses within the same undertaking). It also clarifies other linked elements (such as arrangements concerning any interest that may be chargeable).
4. Requires claimants to register. The instrument’s eligibility requirements are that a person must have subscribed with HMRC’s online service so that an undertaking can be registered before they can make a claim to be waived in certain circumstances (which are to be specified in an HMRC notice).
5. Clarifies the process for claiming a relief and provides HMRC an additional 30 days in which to consider claims, where this extended period is necessary.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
N/A	N/A	N/A	N/A	N/A	N/A

Where required, the final costing will be subject to scrutiny by the Office for Budget Responsibility and included in their forecasts at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts, although the measure is intended to be beneficial to businesses moving goods to Northern Ireland.

Impact on individuals, households and families

There is no impact on individuals as this measure only affects businesses

Equalities impacts

It is not anticipated that there will be impacts for those in groups sharing protected characteristics.

Impact on business including civil society organisations

This provision which updates references to JCD1/2023 is expected to have a positive impact on businesses as it expands the range of businesses and sectors that can benefit from being able to declare their goods as ‘not at risk,’ relieving them from EU duties. The provisions which update relief and repayment arrangements measure also simplify the existing requirement to report de minimis state aid through a form posted or emailed to HMRC with a digital service hosted on gov.uk.

This measure is not expected to have an impact on civil society organisations.

Operational impact (£m) (HMRC or other)

HMRC will incur negligible costs because of this change due to the operational costs of the digital service that will collect information from undertaking leads and registering additional businesses for the UK Internal Market Scheme.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be kept under review through communication and stakeholder engagement with trade bodies and other representative businesses.

Further advice

If you have any questions about this change, contact Jack Cooper, James Wilson or Zachary Azim in the Northern Ireland Customs Policy Team by email at:

• jack.cooper@hmrc.gov.uk
• james.wilson3@hmrc.gov.uk
• zachary.azim@hmrc.gov.uk

Declaration

Victoria Atkins MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.