The Impact of Brexit on VAT Between Ireland and the UK [What You Need to Know]
The Impact of Brexit on VAT Between Ireland and the UK [What You Need to Know]
Since Brexit was announced, the VAT situation that exists between Ireland as well as that of the UK has drastically changed. The once-smooth trading relationship between the EU and Ireland has now become a tangled web of VAT rules outside of the EU as well as customs procedures in addition to dual tax systems particularly in the case oaf Northern Ireland.
If you’re a firm that is involved in cross-border commerce or an online consumer purchasing goods These changes may have changed your expenses, reporting obligations as well as tax obligations.
This guide explains the essential information you need concerning this tax system that will be in place after Brexit as well as how it impacts the trade relationship across Ireland as well as the UK and how to stay legally compliant with this new tax system.
Pre-Brexit: The Simplicity of EU VAT Rules
Prior to Brexit the trading relationship with Ireland as well as the UK was seamless and controlled in accordance with the EU’s tax system that is harmonized:
- No declaration of customs and import VAT.
- VAT was recorded with the reverse charging mechanism.
- No need for VAT cross-border registration.
- Trade was reported through Intrastat as well as VIES VIES systems.
Businesses have benefited by the uniformity of rules and no delays at the border and a reduction in administrative burdens, making the Ireland-UK trade cost-effective as well as simple.
Post-Brexit VAT Changes: What’s New?
After the UK’s exit out of the EU VAT system on January 1st, 2021, a brand new VAT set of rules went into force:
| Area | Northern Ireland (NI) | Great Britain (GB: England, Scotland, Wales) |
|---|---|---|
| VAT Status | It is considered to be part of the EU the VAT zone (for items only) | Considered considered a third-country (non-EU) |
| Customs Declarations | It is required for the transportation of goods across the border | Required |
| VAT Registration | Intrastat & VIES reporting remains | You may need to sign up to import VAT |
| Import VAT | Processed through postponed accounting (if you are eligible) | VAT on imports is applicable, but no longer supply from within the EU. |
| Services | Treat like the rest of the UK; EU rules don’t apply. | Taxes on non-EU services subject to VAT rules |
Post-Brexit VAT Compliance: Key Considerations
New VAT Compliance Rules
- Commerce With Great Britain now is subject to the VAT rules of non-EU countries..
- The trade between Northern Ireland still requires VIES and Intrastat reports for merchandise.
- The VAT and the EORI number could now have to be inspected separately for exports and imports.
- The postponed VAT accounting can be utilized to delay VAT payment at the time where the entry point is (improves the flow of cash).
Adjusting Your Business Strategy
Companies in Ireland dealing with GB must:
- Sort out exports and imports in a proper way.
- Cost Irish VAT for imports into the United Kingdom unless you are using postponed accounts.
- Be aware of how to understand the the place of supply regulations in relation to services, specifically for B2B contracts.
- Stay informed about UK VAT legislative changes since they are now in conflict with EU regulations.
VAT Implications for Businesses
In the event that you’re an Irish company that trades with the UK here’s what to be prepared for:
Trade With Great Britain (GB)
- As any other country outside of the EU.
- You’ll be charged Irish TVA on imported goods from the UK.
- UK companies may require the Irish VAT code when they sell directly in direct sales to Irish clients (distance selling thresholds do not are in effect).
Trade With Northern Ireland
- NI is currently part in the EU TVA system, which applies only to products however, it is not a service.
- It is imperative to continue reporting through VIES, and Intrastat.
- Services adhere to UK regulations and not EU ones. This creates the hybrid system.
Tips for Pros Use to use the postponed accounting scheme to avoid VAT upfront costs on imports to Ireland.
Consumer VAT Implications
You’re an Irish customer buying from UK retailers:
- Imported goods from GB are being subjected to Irish tax at entry point.
- Anything valued less than EUR150 could also be subject to VAT (even in the absence of customs duties are in place).
- Customs clearance costs could be charged by courier businesses.
- For digital services, UK providers may now charge UK VAT, not Irish VAT.
Northern Ireland Protocol: A Special Case
As per the Northern Ireland Protocol, NI remains part of the EU VAT zone for products and services, whereas:
- Services are governed by UK VAT regulations.
- Goods trade that are traded between Ireland in the Republic of Ireland and Northern Ireland is still considered to be the trade within the EU..
- Companies are required to report through Intrastat as well as VIES.
- A unique tax number XI is utilized by traders based in the UK.
VAT Compliance and Reporting Tools
Now is the time to be active and organized:
| Tool/Requirement | Purpose |
|---|---|
| EORI Number | Required for declarations of customs on exporting or importing |
| Postponed Accounting | You can defer VAT payments until your VAT return |
| Intrastat | Required for trade of products with Northern Ireland |
| VIES | Sales reports of EU VAT-registered customers |
Failure to adhere is likely to cause delays, penalties and disruptions in supply chain–so make sure that your systems are up-to-date and that your employees are trained.
Future VAT Developments: What to Watch For
Brexit isn’t “done” when it comes to VAT:
- A further deviation among UK VAT rules and EU tax rules can be to be expected.
- The VAT rules for the United Kingdom may be made simpler as well as more industry-specific which could complicate cross-border alignment.
- EU tax reforms to VAT, such as electronic invoice mandates as well as VAT reforms, such as the VAT within the Digital Age (ViDA) initiative, may affect Irish businesses, but they won’t be applicable in the UK.
Businesses need to stay flexible and be aware of any the latest developments in Revenue.ie along with HMRC.
FAQs: Brexit and VAT Between Ireland & the UK
How has Brexit affected the tax structure for trade between Britain and Ireland?
It replaced the VAT rules for intra-EU countries with import and export regulations and it introduced VAT on imports as well as mandatory declarations of customs for the UK.
Do Irish customers pay more for purchasing directly from UK?
Yes. Goods imported from GB are now imported, which are subject to Irish tax and customs fees which will increase the final cost.
Does trade that involves Northern Ireland treated the same?
No. Goods are still subject to EU VAT regulations however, services are subject to UK VAT laws. This creates an dual-treatment system.
Do UK companies require Irish tax numbers?
Sometimes. If you sell directly to Irish customers, they might be required to apply for VAT registration in Ireland following the Brexit vote.
Conclusion: Stay Compliant, Stay Competitive
Brexit has undoubtedly complicated VAT regulations that are in place between Ireland as well as the UK. Starting with customs statements to the divergent tax rules for service VAT, businesses are operating within an complex VAT system.
Despite these modifications, Ireland-UK trade remains solid–valued at more than EUR36 billion by 2021 in the year 2021 alone.
To be successful post-Brexit, your best option is to:
- Stay abreast of changes to VAT.
- Make use of tools like delay-in-accounting.
- Make sure you get an accurate and reliable report You can ensure accurate reporting through Intrastat as well as VIES.
- You may want to seek professional tax advice to conduct cross-border transactions.
