Northern Ireland Protocol: A surprise when it comes to VAT
As more details emerge about Rishi Sunak’s new deal with the EU, Alison Horner, indirect tax partner at MHA, says some of the VAT changes in the new arrangements are surprising: “As more detail emerges about the new deal it is becoming clear it’s a good deal from a trading perspective. Overall it will significantly ease trading conditions between Great Britain and Northern Ireland. The treatment of VAT came as something of a surprise though.
“It was thought Northern Ireland’s presence in the EU’s single market meant it would have to remain closely bound by EU VAT rules, which prohibit, for example, the UK’s new 0% VAT rate for the installation of heat pumps and solar panels being implemented in Northern Ireland. Yet the new deal does say that consumers in Northern Ireland will be able to benefit from the UK’s measures.
“Similarly, additionally Excise Duty changes will also now be harmonised which is a departure from the EU directing rates for Northern Ireland.
“For movable goods, it’s less clear that the agreement will produce any greater freedoms for the UK to set new zero-rates in Northern Ireland. VAT rates on moveable goods will be subject to the UK and EU agreeing (via a joint committee) a list of goods not being at risk of entering the EU.
“It’s difficult to imagine what those goods might be. For example, suppose the UK wanted to introduce a zero-rate for EVs – that could be done in Great Britain, but as cars are naturally at risk of entering the EU, it couldn’t be done in Northern Ireland. Given the political sensitivity of setting different VAT rates in Great Britain from Northern Ireland, this part of the agreement could be seen to tie the UK more closely to EU VAT rates.”
