27th January 2021
From 1 January 2021, Northern Ireland is now in the strange position of having dual status with the EU and UK VAT and customs union for goods. The aim is to avoid physical border controls at the Northern Ireland and Republic of Ireland border.
So how does this affect the VAT treatment of goods being moved between Northern Ireland, the rest of the UK and the EU?
The starting point to note is that businesses moving goods from Northern Ireland will now need a special XI EORI number.
When goods are moved from Northern Ireland to the EU, the existing EU VAT rules remain in place. This means that the distance selling rules apply when selling goods to consumers in other EU countries (until 1 July 2021 when the distance selling thresholds will be abolished across the EU).
When supplies of goods are made to EU business customers, the sales should be treated as being a zero-rated intra-EU dispatch of goods. This is of course different to the position when goods are sold from the rest of the UK to other EU countries, which will be seen as being an export of goods. Such a sale is also zero-rated but duties will be payable on import into the EU, unlike the situation where they move from Northern Ireland.
When goods are sold between the rest of the UK and Northern Ireland this will still be a domestic supply, so VAT will be chargeable accordingly. However, when businesses move their own goods from the rest of the UK to Northern Ireland this will be seen as being an import for VAT purposes, so an output VAT amount will need to be declared with the same amount being recoverable as input VAT (subject to the usual recovery position).
This will also impact supplies by members of a VAT group. Usually, of course, supplies between members of the same VAT group are disregarded for VAT purposes. However, when goods are supplied from the rest of the UK to Northern Ireland, VAT will now be due on this supply in the same way as the movement of own goods detailed above.
There will be no need to account for any VAT when own goods are moved from Northern Ireland to the rest of the UK.
Trader Support Service
As well as VAT differences, there will also be additional customs declarations to be made when sending goods between the rest of the UK and Northern Ireland. HMRC have therefore introduced the Trader Support Service. This is a free online tool which offers support and guidance to businesses that are moving goods between the rest of the UK and Northern Ireland. Businesses that sign up for this service will also automatically be issued with an XI EORI Number.
Margin scheme sales
It should also be noted that from 1 January 2021 any margin scheme will not be available when stock is purchased in the rest of the UK and sold in Northern Ireland. Instead, VAT will need to be accounted for on the full value of the supply as normal. The margin scheme will still be available for the sale of goods that are purchased in Northern Ireland or the EU and sold within Northern Ireland, the rest of the UK or the EU.