Following the end of the Brexit transition period on 31 December 2020, Northern Ireland (NI) has a dual position in the EU Customs Union, Single Market and VAT regime as well as in the UK’s equivalents for goods only. A Brexit free trade deal with no goods tariffs or quotas was announced 24 December 2020. This had no material bearing on the NI position.
Following the end of the Brexit transition period on 31 December 2020, Northern Ireland (NI) has a dual position in the EU Customs Union, Single Market and VAT regime as well as in the UK’s equivalents for goods only. A Brexit free trade deal with no goods tariffs or quotas was announced 24 December 2020. This had no material bearing on the NI position.
This blog explains the new XI VAT and EORI (see below) numbers are now to be used on invoices, statistical reporting and customs documents to help HMRC and the EU follow transactions. These transactions under the NI Protocol are:
- Goods are located in NI at the time of sale;
- Goods supplied B2B in NI by VAT-registered EU businesses; or
- The sale or movement goods from NI to EU
All of the continuning trade between NI and EU will still be recorded in the UK VAT return in boxes 2, 8 and 9 of the VAT return as EU transactions – acquistions and dispatches. Northern Ireland VAT Triangulation transactions are also still possible.
Firstly, tell HMRC that you are trading in NI
If you are a UK VAT-registered business you should tell HMRC if you are a party in any of the above Protocol transactions so that:
- you’ll be eligible to use the below VAT simplifications when you trade with the EU
- your suppliers are able to zero rate goods that they dispatch to you from the EU
- your trade with the EU will remain acquisitions and dispatches when accounting for VAT
How will this affect the VAT treatment on goods?
For NI trade with GB, this is treated as a domestic UK transaction so UK VAT applies. Goods moving between Ireland and NI established traders are unchanged, and continue to be treated as movements across internal EU borders. For B2B, this means they remain intracommunity VAT zero-rated transactions. Traders will have to obtain an XI EORI number, see below, for certain Protocol transactions detailed below. These are used on sales invoices and various declarations to help the tax authorities understand the tax treatement.
B2C NI – Ireland goods sales
B2C sales between NI to Ireland are still be subject to the distance selling threshold rules – but then subject to the VAT of the consumer’s country of residence. Note this changes on 1 July 2021 under the EU e-commerce package when distance selling thresholds are scraped. Instead, NI sellers to Irish (or any EU consumer) will be able to use a single VAT return (One-Stop-Shop, OSS). For the 2021 UK ecommerce VAT reforms, there are special rules on B2C goods held in NI by overseas sellers.
B2B NI – GB goods movements
Any B2B goods moving between NI and GB are treated as domestic UK VAT supplies for VAT. Contrary to the Protocol, the UK has chosen to treat GB to NI as a domestic transaction, using Articles 201 and 211 of the EU VAT Directive to allow it to be flexible, and is prioritising the integrity of the UKs VAT union. This means it is considering its sales VAT as simulating the effect of import VAT rather than as a domestic supply. The EU has accepted this, although some EU member states are using the XU country code to identify GB-transactions as separate from NI or UK transactions.
Xi number
The UK and EU have agreed the above transactions should use the ‘XI’ country code instead of ‘GB’ for VAT numbers on invoices and statistical declarations. This is based on the UK view that NI-GB is a domestic transaction.
Below is a provisional analysis of the various B2B transaction permutations, and how to use the ‘XI’ country code in invoices and statistical reporting (EC Sales Listing). Businesses should substitute ‘XI’ country code in their GB VAT number on invoices so that the transactions can be identified separate from UK VAT transactions. So XI 123456789 – instead of GB 123456789.
There is no requirement to apply for a new XI VAT number. Businesses with NI postcodes will automatically be assumed to be operating within the terms of the NI Protocol. NI businesses may also use the EU VAT refund scheme. Any business which has not received an XI number that it believes it will need should contact HMRC.
More information, visit the website: https://europe-tax.com/
