Legal foundation for taxing goods crossing the Northern Ireland border
9 December 2020: ICAEW’s Tax Faculty provides an overview of the new Bill to implement key aspects of the Northern Ireland Protocol relating to the tax treatment of goods.
On 8 December 2020, the government introduced the Taxation (Post-Transition Period) Bill to implement important elements of the Northern Ireland Protocol in UK legislation and provide legal clarity for how customs, VAT, and excise duty will be dealt with after the end of the transition period.
This is a money bill primarily setting out how exports of goods to/from the European Union (EU) will be dealt with after 31 December 2020.
In particular, it grants powers relating to the taxation of goods in Northern Ireland (NI), as well as taxation on goods being moved into, or out of, NI and allows for the implementation of the fiscal aspects of the Northern Protocol. This includes the imposition of customs charges on the movement of certain goods arriving in and leaving Northern Ireland.
It will also enable provision to be made about VAT in Northern Ireland, including the preservation of the system of acquisition VAT for goods acquired from the EU. It will also enable provision to be made about excise duty in Northern Ireland.
The Bill will also ensure that EU goods imported into NI from Ireland are not subject to customs duties or processes. It will also ensure the UK’s customs regime applies for goods moving from NI to Great Britain if those goods do not qualify for unfettered access.
In simple terms, customs duty will be charged when non-domestic goods move from Great Britain to NI where they are at risk of subsequently being moved into the EU.
What goods are ‘at risk of subsequently being moved into the EU’ will be determined by Treasury regulations. The duty charge itself will be based on whatever would have been charged on the goods if they had entered EU customs territory.
The Bill also includes provisions on other topics including:
- the zero-rating of supplies to European Research Infrastructure Consortia;
- the rate of fuel duty on aviation gasoline;
- VAT on supplies facilitated by online marketplaces and VAT on low value importations;
- insurance premium tax; and
- the recovery of unlawful state aid concerning the controlled foreign company group financing exemption.