Policy paper

VAT: Value Added Tax in Northern Ireland

Published 21 December 2020

Who is likely to be affected

Businesses and individuals who trade in or move goods to or from Northern Ireland (NI).

General description of the measure

This document covers 3 statutory instruments (SIs) which make provision relating to VAT in order to implement the Northern Ireland Protocol (the Protocol), and to make associated changes. These are the:

• Value Added Tax (Miscellaneous Amendments to the Value Added Tax Act 1994 and Revocation) (EU Exit) Regulations 2020

• Value Added Tax (Miscellaneous Amendments, Northern Ireland Protocol and Savings and Transitional Provisions) (EU Exit) Regulations 2020

• Value Added Tax (Northern Ireland) (EU Exit) Regulations 2020

These statutory instruments bring UK law in line with obligations under the Protocol and make further provision appropriate in connection with the withdrawal of the UK from the EU. Under the Protocol, Northern Ireland maintains alignment with the European Union (EU) VAT rules for goods. These statutory instruments do not cover the provision of services in, to or from Northern Ireland, as services are not in scope of the Protocol.

Under the Protocol, movements of goods between Great Britain and Northern Ireland will be treated as imports and exports. However, accounting mechanisms will ensure that, in so far as is possible, VAT will be accounted for by businesses and individuals as it is today.

These Statutory Instruments make amendments to primary and secondary VAT legislation to introduce provisions relating to charges and accounting for the movements of goods to and from Northern Ireland after the end of the transition period. Secondary legislation also introduces rules specifically in relation to movements of goods between Great Britain and Northern Ireland.

Policy objective

The statutory instruments covered by this document implement the Protocol in relation to VAT while ensuring that, in so far as is possible, the VAT accounting treatment for goods moving to and from Northern Ireland remains as close as possible to the current approach. In line with the Protocol, Northern Ireland maintains alignment with the EU VAT rules for goods. This means that the rules for intra-EU movements of goods that currently apply will continue to apply to Northern Ireland after the end of the transition period. This, for example, includes current EU rules on distance selling, acquisition VAT and the various accounting and administrative processes.

Background to the measure

The UK left the EU on 31 January 2020 and entered a transition period during which time EU VAT rules continued to apply. The transition period ends at 11pm on 31 December 2020. In order to keep the VAT systems in line with the UK’s obligations under the Protocol, it is necessary to make amendments, additions and exceptions to existing legislation to ensure that comprehensive rules are in place with regards to Northern Ireland and Great Britain.

Detailed proposal

Operative date

The measure will come into effect at the end of the transition period which is 11pm on 31 December 2020.

Current law

Current VAT law is contained in Value Added Tax Act and extensive secondary legislation made under it, as well as in other primary legislation such as various finance acts. In the light of the UK’s exit from the EU, the Taxation (Cross-border Trade) Act 2018 amended Valued Added Tax Act (VATA). Existing law contains rules in relation to imports into the territory of the EU, exports from the territory of the EU and intra-EU movement of goods, but not specifically in relation to Northern Ireland.

Proposed revisions

The Value Added Tax (Miscellaneous Amendments to the Value Added Tax Act 1994 and Revocation) (EU Exit) Regulations 2020.

This statutory instrument makes further amendments to primary legislation, specifically VATA, required to implement the Protocol in relation to VAT. The majority of required changes to primary legislation are made by the Taxation (Post-transition Period) Act 2020 (TPPA).

The Value Added Tax (Miscellaneous Amendments, Northern Ireland Protocol and Savings and Transitional Provisions) (EU Exit) Regulations 2020

This statutory instrument primarily makes amendments to secondary legislation that are necessary in consequence of provisions made in the Taxation (Post-transition Period) Act 2020 as a result of the Protocol. This will, for example, reinstate rules omitted by earlier EU Exit legislation, modified as required, in relation to acquisitions of goods from the EU to Northern Ireland and other rules in relation to the movement of goods between Northern Ireland and the EU. It also makes provision, unconnected with the Protocol, relating to the appropriate input tax treatment applicable to the export of certain financial services. The statutory instrument also includes savings and transitional provisions that are required for the end of the transition period.

The Value Added Tax (Northern Ireland) (EU Exit) Regulations 2020

This statutory instrument introduces additional provisions in relation to the movement of goods between GB and Northern Ireland. This includes the introduction of any necessary exceptions required to the rules contained in new Schedule 9ZB to VATA (as introduced by the Taxation (Post-transition Period) Act 2020). It also includes providing for accounting and invoicing rules required for these movements. The changes introduced by this statutory instrument rely on flexibilities within EU legislation to keep things as close as possible to the current approach. This includes the application of an offset in certain circumstances, where VAT has already been paid on the goods.

Summary of impacts

Exchequer impact (£million)

2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026
–	–	–	–	–	–

The Office for Budget Responsibility included the impact of EU exit in their Economic and fiscal outlook November 2020, including the impact of this measure.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

These statutory instruments are not expected to have any impact on individuals. The measure does not introduce any requirement beyond what has already been agreed in the Protocol. There is not expected to be any impact on family formation, stability or breakdown.

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

These statutory instruments are not expected to have any additional impact on businesses, including civil society organisations, as this measure is in line with the implementation of the Protocol, which is already part of UK law, and as such the impacts have already been considered.

This assessment can be found in a 2019 assessment of the EU Withdrawal Agreement Bill

Operational impact (£million) (HMRC or other)

These statutory instruments do not introduce any requirement beyond what has already been agreed in the Protocol, so there are no further operational costs for HMRC or other public bodies.

Other impacts

Other impacts have been considered and none has been identified.

Monitoring and evaluation

This measure will be monitored through information collected from VAT returns and communication with affected taxpayer groups.

Further advice

If you have any questions about this change contact Meenakhi Borooah on Telephone: 03000 512197 or email: meenakhi.borooah@hmrc.gov.uk.

Declaration

The Right Honourable Jesse Norman 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.