Overview
The VAT rules applicable to trade with Great Britain are likely to change after the effective date of Brexit. The rules that apply are likely to be those that apply to sales of goods outside the EU.
The UK has updated its VAT rules so that in effect after Brexit, they will no longer provide for special treatment for sales within the EU. The rules will be those applicable to exports and imports in all cases. They will be in turn, like those applicable in Ireland and the rest of the EU, at least at first, save that they apply in the equal and opposite direction.
From the UK perspective, purchases from anywhere outside the UK into the UK will be dealt with in the same way as imports from outside the EU from a Republic of Ireland perspective. Equally, sales by a UK company to the EU are dealt with in the same way as sales by an EU/Republic of Ireland company out of the EU.
The UK VAT legislation is as an effective mirror image of the EU VAT legislation. Movements of goods to from outside Great Britain will be treated in the same way as third-country imports and exports at present.
VAT is a UK wide tax. There is a single of VAT Act applicable in Great Britain and Northern Ireland is likely to be the same as that in the United Kingdom. However, in the context of trade in goods, differentiation will be necessary between VAT in respect of transactions between EU established traders and traders established in Northern Ireland and Great Britain, respectively.
Export of Goods Ireland to GB B2B
Sales of goods which move directly from the Republic of Ireland to Great Britain will usually be zero-rated. That is to say; VAT will generally be recoverable on the expenses in relation to the sale of the goods concerned but VAT will not be chargeable on the sale.
On the opposite side goods directly imported into the UK will be subject to VAT at the point of entry. The VAT is payable or accounted for by the importer on the customs value (which may be more than the invoice price and will include the cost of transport and insurance to the border.) plus any customs duty,
In the case of a business to business sale to a VAT registered trader in the UK, the buyer should generally be entitled to reclaim the import VAT paid as part of its input or expenses. As in Ireland VAT is generally paid at the point of import but there exists an existing scheme whereby VAT can be deferred for a month which requires a guarantee.
In the context of a hard Brexit risk dates in 2019, the UK announced deferred VAT accounting up to the date that VAT was due rather than just one month. It indicated that a guarantee would not be required at least initially.
Export of Goods Ireland to GB B2C
In the case of a sale by Irish business to a consumer or non-registered buyer in the UK, VAT is payable at the point of entry in the same way. Such a person or entity would not be able to reclaim VAT so that it must be paid at the point of entry. Postal authorities and parcel couriers are likely to collect the VAT before releasing the goods unless a special arrangement is made, whereby the seller arranges to secure and pay the VAT.
There is a low-value consignment relief for consignments less than £135. This is also the general level for customs duty exemption. Irish exporters selling individual consignments below this level may register and account to the UK revenue (HMRC) for the VAT concerned, under a special stand-alone scheme. Accordingly, the consignment may be delivered to the consumer//non-VAT registered business without payment of customs duty or VAT.
Import of Goods GB to Ireland B2B
The VAT position with respect to the sale of goods from Great Britain to Ireland is effectively the same as the above but in reverse. On a business to business sale by a UK seller to a Republic of Ireland VAT registered buyer the sale is zero-rated as an export out of the UK after Brexit and the Irish buyers/importers pay or accounts for VAT at the point of import. Once again, VAT is charged on the customs value of the import together with the cost of insurance and transport to the border.
In the normal course import VAT may be deferred until the middle of the following month provided the importer has a cash backed guarantee insurance bond or bank-backed guarantee in place. In the legislation passed on the eve of Brexit last March provision was made for postponed accounting whereby VAT registered importers could in principle postpone the due date for until the next VAT return.
If they were VAT registered business entitled to reclaim VAT that they could effectively offset the import VAT against the credit which they would be entitled by way of input VAT. There is power in the legislation for conditions to be applied. It might be expected that in due course, a requirement for a guarantee might be applicable. This is a condition for the general requirements for deferred accounting or customs and VAT
Import of Goods GB to Ireland B2C
The position in respect of sales to consumers a non-VAT registered person in Ireland is the same as the UK position save in reverse. Generally, the importer must pay VAT at the point of entry. This may involve payment of VAT (and customs duty applicable) to the postal authority or the parcel courier before the release of the goods. It may be possible for the UK exporter to enter an arrangement with the parcel courier whereby VAT is paid by the exporter and the parcel courier acts as its representative in Ireland.
In both above scenarios, the other alternative to having VAT paid at the point of entry would involve interposition of a distributor or a subsidiary/branch of the seller in the jurisdiction of import. That branch or subsidiary would have to register for and account for import VAT which might then reclaim VAT and charge VAT to customers and consumers within the country of import.
There are some exceptions to the general rules, whereby VAT is always payable in a particular place. They apply in defined cases where the supply is intimately connected to a particular place. This may necessitate Republic of Ireland trader registering in that place in the UK or vice versa.
Northern Ireland
Northern Ireland is intended to remain subject to the existing rules for sales within the EU. Therefore, sales of goods B2B from Ireland to Northern Ireland would be exempted as at present.
B2C sales to Northern Ireland will remain chargeable in the Republic of Ireland unless the annual turnover in the UK exceeds a certain level. Over that level, the Irish trader must be registered in the UK / NI. It is not clear whether the UK side turnover level will apply to Northern Ireland only. In this event, the requirement for registration may no longer apply to certain businesses.
Equally purchases of goods from Northern Ireland would take place on equivalent terms. In the case of B2B sales to the Republic of Ireland, VAT registered buyer will generally self-account.
B2C sales would be likely to be subject to UK VAT up to the point the seller exceeds the Irish Intra EU registration threshold.
Triangulation
The above rules in relation to VAT apply to direct movements of goods from the Republic of Ireland to the UK and the UK to the Republic of Ireland. The position in relation to VAT on goods is much more complicated even at present where the goods move from another EU country.
The basic rule is that VAT is chargeable where the goods are at the time the transportation commences. This may necessitate registration by the supplier in another jurisdiction where, for example, it purchases goods from a supplier in France which it directs to be delivered directly to a customer in the United Kingdom. At present and prior to Brexit there is an important triangulation relief which relieves the Irish supplier from registering in the EU 26 country, provided the relevant conditions are met.
After Brexit, triangulation relief will be longer available so that there will be more instances in which it is necessary to register for VAT in the country where the goods originate.
VAT Information
The VAT Information Exchange System will be no longer be available for the UK/ GB. After Brexit the UK (or at least Great Britain) will no longer be part of the VAT information exchange system. The requirements for VIES returns, and Intrastat returns will no longer apply in respect of imports from and exports to the United Kingdom.
Much is at present, but to a greater extent, it will be necessary to have proof of direct exports in order to secure the zero rate on the supply.
It is likely to be possible to consult the equivalent UK database. It will be critical, as at present to obtain proof of the establishment of the buyer outside the European Union (in the UK) and proof that it is a trader/business.
