Accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021
Last updated 24 May 2021
The Northern Ireland Protocol means that Northern Ireland maintains alignment with the EU VAT rules for goods, including on goods moving to, from and within Northern Ireland. However, Northern Ireland is, and will remain, part of the UK's VAT system.
UK VAT rules related to transactions in services will apply across the whole of the UK. HMRC will continue to be responsible for the operation of VAT and collection of revenues in Northern Ireland.
Under the obligations in the Protocol, import VAT will be due on goods that enter Northern Ireland from Great Britain. The same will also broadly apply to goods entering Great Britain from Northern Ireland. However, existing flexibilities within the EU VAT rules have been used to ensure that the Government priority to minimise business impacts is met. In particular, Articles 201 and 211 of Directive 2006/112/EC mean that it is for the UK Government to determine important practical details as to how this will operate. The Government will preserve the integrity of both the UK and EU single markets.
Under the Protocol, transactions in goods between Northern Ireland and EU businesses and consumers will continue as they do today. The same processes and reporting requirements will apply and Northern Ireland businesses intending to make transactions under the Protocol should ensure they are able to continue to operate in this way.
The only change is related to the use of the ‘XI’ prefix when trading under the Northern Ireland protocol.
This guidance outlines how VAT processes will operate between Great Britain and Northern Ireland on goods sold by VAT-registered businesses. This is in line with the UK's obligations under the Protocol.
Registering for VAT
Northern Ireland is, and remains, part of the UK's VAT system. There will be no requirement for a new VAT registration for sales of goods in Northern Ireland. If you are already VAT registered, your existing VAT registration will be unaffected and you will not need to get another VAT registration. You will continue to account for VAT on all sales across the UK through your single UK VAT return, which will contain the same boxes as now.
VAT on goods sold between Great Britain and Northern Ireland
VAT will continue to be accounted as it is currently on goods sold between Great Britain and Northern Ireland. This means that the seller of the goods will continue to charge its customers VAT and should show this on its invoices. The VAT charged will be accounted for as output VAT on the VAT return in the same box as it is now. The seller will not be able to claim this back as input VAT.
Where the customer receives an invoice from the seller showing that VAT has been charged, it may use this as evidence in order to reclaim the VAT as input VAT, subject to the normal rules.
However, there are a small number of exceptions to this where goods are:
- declared into a special customs procedure when they enter Northern Ireland or Great Britain
- currently subject to domestic reverse charge rules including on sales of gold or gas and electricity to a VAT registered business
- subject to an Onward Supply procedure
- sold by an overseas seller through an online marketplace
Where the movement of goods is declared into a special customs procedure, the customer or importer will be liable to account for the VAT. Importers will need to select how to pay or account for the VAT when discharging goods from the special procedure. If they are VAT registered they will be able to use Postponed VAT Accounting to account for the VAT on their VAT return. Alternatively, like businesses that are not VAT registered, they can pay the VAT upfront, or use their duty deferment account.
Where goods are subject to domestic reverse charge rules, including on sales of gold or gas and electricity to a VAT registered business, the customer will continue to account for the VAT on these goods.
Where goods are sold between Great Britain and Northern Ireland by an overseas seller to a consumer through an online marketplace, the online marketplace will be liable to account for the VAT on these goods.
VAT on goods sold from Great Britain, transported via Northern Ireland, to an EU member state
This refers to goods transported via Northern Ireland to an EU Member State, for example the Republic of Ireland. For these movements, the VAT treatment will depend on the specific circumstances or arrangements agreed between the seller and customer. Broadly, it will depend upon where the goods are situated at the point at which the transfer of rights to the goods takes place.
With respect to recovery of input tax, any VAT that is charged may be recovered only by the business using the goods in the course of making taxable supplies. In the scenario described in this section, this will be the EU recipient.
If goods are located in Great Britain at the point of sale
Where goods are sold from a UK seller to an EU customer, and the goods are subsequently sent by the seller from Great Britain, via Northern Ireland, to the customer, the process will be similar to accounting for a direct movement from Great Britain to Northern Ireland. The seller should zero rate the goods on export to the EU, but also will be liable to account for the import VAT on the movement.
The UK seller should include the import VAT in the price it charges to the EU customer, to ensure it is paid by the customer. The import VAT charged will then be accounted for as output VAT on the UK VAT return by the seller.
Having paid the import VAT to the seller, the EU business may recover it using the EU VAT refund system, unless they have a UK VAT registration. In this case, it may be recovered on their UK VAT return. The UK seller will not be able to claim this back as input VAT as it will have been paid to them by the customer rather than incurred by their business.
There will be an exception to this rule where goods are declared into a special customs procedure or Onward Supply procedure when they enter Northern Ireland or before arriving at the first EU member state.
Where goods are declared into an Onward Supply procedure, import VAT on the goods as they enter Northern Ireland will be relieved, and the EU customer should account for the acquisition VAT. Where the goods are moved from Great Britain to the EU under a special customs procedure, including Transit, import VAT will be due where and when those goods leave the customs procedure and are declared to free circulation. The importer will at that point be liable to account for the VAT in the EU member state in which this takes place.
If goods are located in Northern Ireland at the point of sale
Alternatively, where the UK seller moves goods from Great Britain to Northern Ireland, then supplies those goods to an EU customer after that point, this is to be treated as two distinct movements.
The first will be treated as a movement of own goods from Great Britain to Northern Ireland, and will follow the process for businesses moving their own goods from Great Britain to Northern Ireland. The second movement will be an intra-Community sale, and would follow rules on acquisitions and dispatches, or distance sales where the customer is not VAT-registered.
VAT on goods sold to Great Britain from an EU member state via Northern Ireland
This refers to goods transported via Northern Ireland from an EU member state, for example the Republic of Ireland.
Where goods are sold and moved via Northern Ireland to Great Britain from a VAT-registered business in an EU member state, including the Republic of Ireland, the seller will be liable to account for the import VAT to HMRC.
The EU business will have to register with HMRC and account for the VAT on a UK VAT return. The UK customer will be able to reclaim the VAT as input VAT, subject to the normal rules.
Businesses moving their own goods from Great Britain to Northern Ireland
When a VAT registered business moves goods from Great Britain into Northern Ireland, VAT will be due. The business will need to account for VAT on the movement. This should be included as output VAT on the VAT return.
Where the goods are being used for taxable sales, the VAT may also be reclaimed as input VAT on its UK VAT return, subject to the normal rules.
Where a business uses the goods for exempt activities, or where the goods are put to a taxable use and also exempt use, it may be required to make an adjustment to its partial exemption calculations.
Businesses moving their own goods from Northern Ireland to Great Britain
A business will not be required to account for VAT when it moves its goods from Northern Ireland to Great Britain unless these goods have been subject to a sale or supply.
Sales of goods from Great Britain to Northern Ireland, and within Northern Ireland, by members of a UK VAT group
UK VAT groups will continue to operate largely as they do now. VAT groups will continue to be able to include members that are established in Northern Ireland as well as members that are established in Great Britain. However, there are a small number of changes to the way in which a VAT group will operate when they move goods from Great Britain to Northern Ireland, or where goods in Northern Ireland are sold between members.
Usually, supplies of goods between members of a VAT group are disregarded for VAT. This means that the group does not have to account for VAT on the supply. However, where goods are supplied by members of a VAT group, and those goods move from Great Britain to Northern Ireland, VAT will now be due in the same way as when a business moves its own goods.
Where supplies of goods are made between members of a VAT group, and those goods are located in Northern Ireland at the time that they are supplied, these will only be disregarded if both members are established, or have a fixed establishment, in Northern Ireland. Where one or both members only have establishments in Great Britain, the disregard will not apply and VAT must be accounted for by the representative member. This VAT may be reclaimed subject to the normal rules.
VAT Retail Export Scheme
The VAT Retail Export Scheme (RES) permits retailers to offer refunds of VAT on goods to visitors to the EU and Northern Ireland where they take those goods with them in their luggage when they leave. Northern Ireland retailers, who use the scheme, will be able to continue to operate it in Northern Ireland, in much the same way as now. VAT RES will not be available to retailers in Great Britain.
The rules on operating the scheme are set out in Notice 704. It will also be necessary to obtain evidence showing the visitor’s destination when leaving Northern Ireland.
The scheme will be available for goods that are removed to Great Britain by visitors to the EU and Northern Ireland. However, additional conditions will apply for goods purchased in Northern Ireland and removed to Great Britain.
Goods that have been subject to a VAT RES claim in Northern Ireland will not be subject to passengers’ allowances and VAT will be due on their full value on entering Great Britain.
Where visitors make purchases in Northern Ireland under the scheme, and remove the goods to Great Britain, the retailer will collect this import VAT before giving the refund of VAT and account for it on their VAT returns.
Retailers will still need to also obtain an endorsed VAT407 claim form as they do now.
VAT will not be due on goods entering Great Britain from Northern Ireland if they have not been subject to a VAT RES claim.
Personal exports of vehicles from Northern Ireland to Great Britain
Visitors from Great Britain are eligible to make purchases under the scheme. Where a purchase is made then the Great Britain visitor is liable to pay the import VAT on the removal of the vehicle to Great Britain.
Where visitors make purchases in Northern Ireland under the scheme, and remove the goods to Great Britain, the seller will collect this import VAT on the full value of the vehicle and account for it as output VAT. They could then zero-rate the sale.
Sellers in Great Britain will be able to offer either scheme to any non-UK resident subject to the same requirements as now.
Sales of goods on board ferries between Great Britain and Northern Ireland
Goods sold on board ferries between Great Britain and Northern Ireland will continue to be taxed domestically in the same way as they do now. UK VAT will be due and this will be accounted for on the seller's UK VAT return.
Where goods are sold on journeys that visit Great Britain and Northern Ireland as part of a voyage to third countries, the supply will be treated as taking place outside the UK and so are outside the scope of UK VAT.
Where goods are sold on journeys between Northern Ireland and an EU member state, these will be taxed in the place of departure, as now.
Adjustments to input VAT on businesses moving their own goods
Businesses that move their own goods between Great Britain and Northern Ireland, will usually be able to recover the full amount of VAT incurred as if it had been a taxable supply.
Businesses that make some supplies that are exempt from VAT may not be able to recover all of the VAT on goods when they are purchased. Where a business moves goods from Great Britain to Northern Ireland, after not having reclaimed the associated input VAT in full, then there is a possibility that there will be irrecoverable input VAT incurred again on the same goods. To prevent this, businesses will be able to reattribute the previously unrecovered input VAT on the original purchase in Great Britain as if the goods had been used for a taxable purchase. This may be taken into account by businesses when making their annual adjustment.
HMRC will be introducing rules to prevent this from being used for avoidance purposes.
Intra-EU rules and simplifications, such as triangulation, will not be available for movements of goods involving Great Britain.
Such simplifications will be available for movements of goods involving EU member states and Northern Ireland or where the intermediary is identified as moving goods in, from, or to, Northern Ireland in the course of its business.
In line with EU rules, margin schemes involving goods, other than motor vehicles, such as the second-hand margin schemes, will not usually apply for sales in Northern Ireland where the stock is purchased in Great Britain. The VAT on these sales will be subject to the normal rules and must be accounted for on the full value of the supply.
Margin schemes will remain available for sales of goods that are purchased in Northern Ireland or the EU, whether sold to customers in Northern Ireland, Great Britain or the EU.
Margin schemes will remain available for sellers in Great Britain selling stock originally purchased in Northern Ireland or Great Britain.
Find further guidance for sales of used motor vehicles.
A fiscal warehouse is a facility where certain goods can be traded VAT-free. Fiscal warehouses will continue to operate in both Great Britain and Northern Ireland and in most cases, transactions within, or between, UK warehouses will be able to continue to be treated as VAT-free.
However where goods are moved between a fiscal warehouse in Great Britain and a fiscal warehouse in Northern Ireland, this will not be treated as a VAT-free movement. The goods would have to exit the fiscal warehouse in Great Britain and be subject to the appropriate VAT, before entering the fiscal warehouse in Northern Ireland.
First published 26 October 2020