Brexit VAT & duties

With less than 2 months to the Brexit year end deadline, there is a marked lack of contingency preparation and awareness by many businesses to the significant impact of the Brexit related fallout to business supply chains.

While this is understandable considering the current difficult trading environment occasioned by the impact of Covid19, it is necessary to be aware and prepared to mitigate the anticipated adverse impact of change. 

The purpose of this article to provide an update status on VAT and Customs Duty related matters from the viewpoint of traded goods movement into and out of the Republic of Ireland, Northern Ireland and the UK.

No deal implications

As it stands or rather in the absence of agreement

At the time of writing (Nov 2020) there is still no agreement on transitional arrangements between EU negotiators and their UK counterparts on post Brexit trading. This has led to speculation that we will be dealing with a No Deal scenario. This introduces the spectre of the imposition of WTO general tariff duties in addition to VAT at point of import. With such a scenario, the level of administration cost, resource requirements and significant logistical delay increase. This comes on top of the challenges already being faced in these Covid19 times.

Also add into the mix, that the UK Government have evoked legislation change that will see them break international law on the existing agreement surrounding the Northern Ireland Protocol on special trading status arrangements involving cross border trade between the North and South of Ireland.

In summary and as a high level refresher!

So, what happens if there's no trade deal by 31st December 2020?

When the transition period ends on 31 December, the UK will automatically drop out of the EU's main trading arrangements (the Single Market and the Customs Union).

The Single Market means that countries share the same rules on product standards and access to services, whereas the Customs Union is an agreement between EU countries not to charge taxes (duty tariffs) on each other's goods.

However, if a new UK-EU trade deal is not agreed in time then tariffs and border checks would be applied to UK goods travelling to the EU - under the rules of the World Trade Organisation. In turn, the UK also decides what tariffs and checks to impose on EU goods.

For goods being sold and moving from Ireland into Great Britain

  • The sale of goods from Ireland to Great Britain should be treated as an export and no Irish VAT charged. Import VAT will arise at the point of importation into Great Britain. 
  • The sale of goods from Great Britain to Ireland should be treated as an import and no UK VAT charged. Import VAT will arise at the point of importation into Ireland. 

For goods being sold and moving from Great Britain into the Republic of Ireland/ EU

  • Customs tariffs will apply to trade between Ireland and Great Britain unless relieved under a free trade agreement.
  • Import and export declarations/customs paperwork will be required in respect of trade between Ireland and Great Britain.

Use of the UK land bridge – it’s far from plain sailing

The UK land bridge refers to how businesses access the Great Britain’s ports and road network in order to move goods between Ireland and mainland Europe. From an economic and logistical prospective, this is a tried and trusted cost efficient method of the movement of goods.

The difficulty presented following Brexit is that because Irish goods will be re-entering the EU and vice versa from a third country (UK post Brexit).

At present, it appears that neither EU, Irish nor British ports are geared towards differentiating British and Irish/EU freight, so an anticipated logistical nightmare of long delays/ cost is evident. In the absence of required negotiations and goodwill of both UK and the EU to ensure movement of goods (particularly in the area of food and animals) between Ireland and mainland Europe via Great Britain remains free flowing, a major logistical nightmare and economic crisis will manifest. 

The use of the UK land bridge remains the quickest and most cost-efficient way to move goods between Ireland and mainland Europe. While the topic of trusted trader, technological surveillance/ clearance has been muted as possible workarounds, such solutions involve State & trader investment and will take considerable lead in time to put in place required infrastructure.

It is clear and acknowledged that there will be additional costs, procedures and delays involved in using the UK land bridge post Brexit. Without agreement on interim measures or passport protocols on the use of the land bridge like how it operates at present, significant challenges arise for traders.

This is something that traders will need to carefully monitor and evaluate.

What about the land border between the North and Southern Ireland?

Following Brexit, the 310-mile border between Northern Ireland and the Republic of Ireland is the only land border between the UK and the EU.

All sides want to avoid border checks to maintain the successful resolution of the former conflicts in Northern Ireland and support of peace on the island of Ireland. Following protracted negotiations, the Northern Ireland protocol (‘NI Protocol’) was implemented,

Under the NI Protocol, which will start on 1 January 2021, Northern Ireland will continue to follow some EU rules - making border checks unnecessary.

However, the arrangement will mean that certain goods arriving in Northern Ireland from other parts of the UK (England, Scotland and Wales) will need to be checked to ensure they comply with EU standards. If any taxes (tariffs) need to be paid, they will be refunded if the goods remain in Northern Ireland and there is no onward movement to the Republic of Ireland.

In September 2020, the UK government said it was seeking to change parts of the NI protocol by introducing a new law in Parliament. The UK government says this is needed to clarify parts of the protocol in order to avoid disruption on 1 January 2020.

The UK government has acknowledged that its proposal would break international law. The breach of the terms and implementation of the NI Protocol agreement, therefore, means the concessional arrangements as negotiated may not operate. Given the significant existing cross border trade, involving the dairy and food sector, such a scenario will generate significant economic, logistical and trading difficulties.

This is something that traders will need to carefully monitor and evaluate.

It’s not too late, the necessary steps a business should take to prepare for Brexit

  • Carry out a Brexit impact assessment and contingency planning if not already started
  • Seek the assistance of and engage competent advisors
  • If you move goods to, from or through Great Britain, you will need to register for Customs by getting an Economic Operators Registration and Identification (EORI).
  • Decide who will submit your Customs Declarations and consider appointing a customs agent.
  • If introduced by the Irish Tax Authorities, consider setting up a VAT and Duty deferral account to defer payment of VAT and duties on importation. 

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars VAT team below.


Frank Greene

Tax Partner

01 4496415

Alan McManus

Tax (VAT) Director

01 512 5525

November 2020