08/07/2021 For many countries, it remains challenging to understand the varied impacts of Brexit - whether doing business directly or indirectly with Northern Ireland and the UK.
Organisations that trade with Northern Ireland should understand that the terms of the Ireland/Northern Ireland Protocol require that Northern Ireland maintains alignment with the EU VAT rules for goods (but not services).
Purchase of goods from Northern Ireland
Under the terms of the Protocol as negotiated, Northern Ireland will remain part of the UK VAT area. The EU VAT rules concerning goods will continue to apply in Northern Ireland. There will be no requirement to file customs declarations to record the movement of goods between the Republic of Ireland and Northern Ireland.
There will also be no change to the current VAT rules in respect to goods traded between Ireland and North Ireland, with the exception that Northern Ireland businesses and those trading goods in Northern Ireland will be required to use an "XI" prefix in front of their VAT registration number, rather than the "GB" prefix when trading with EU suppliers and customers.
Regarding supplies of goods from Northern Ireland ('NI') based suppliers that are purchased by VAT registered traders in the Republic of Ireland, the VAT reporting is similar to how it has been reported pre-Brexit, i.e. the purchases are reported as intra-community imports and require VAT at the standard rate and are self-reported as a reverse charge acquisition; entering the VAT under the T1 box of the VAT return and also noting the E2 box, which indicates the acquisition value of the goods purchased. Similarly, Irish based VAT registered traders can report intra-community exports to NI business customers, similar to the pre-Brexit reporting rules. This allows for the zero-rating of such supplies subject to them obtaining the NI-based customer's VAT registration details and retaining proof of cross border transport into NI.
The above advice is a high-level overview of the currently applicable rules and should not be relied on without getting specific tax guidance based on the individual circumstances of the supply chain in point. They may be subject to change given the ongoing political situation and negotiations between the UK and the European Commission.
Alan McManus, VAT Director
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