Brexit: VAT and other Mazes

On 16 April 2020 the European Commission published an updated version of its helpful guidance on the VAT implications of goods movements between the EU and the UK after the end of the Brexit transition period: https://ec.europa.eu/info/sites/info/files/notice_to_stakeholders_brexit_online_sales_0.pdf

This paper brings the stark realities of the Withdrawal Agreement for goods into the limelight. Despite the Good Friday Agreement and away from the public eye thanks to remarkable PR of the Johnson government, the Withdrawal Agreement has effectively split the United Kingdom into two parts for goods regarding VAT, customs and excise duties: Great Britain and Northern Ireland.

This has introduced complexities of a level not seen before in these areas of law. 

Customs in particular is a minefield. Every goods movement into or from Northern Irland with regards to the rest of the UK, the EU or third countries is administered and subject to customs in a different way. For example, the import of a good into Northern Ireland from a third country like the USA could, on the face of the wording of the Withdrawal Agreement, be treated under one of two different sets of customs rates depending on the circumstances of the import. Or, imports of Union goods from Northern Irland into Great Britain will be subject to fewer customs restrictions than Union goods departing from another part of the EU. Further, important particularities for the determination of customs rates - which can turn a deal into a loss making venture or a business success - are still undecided. Clearly, where the UK and the EU were unable to agree, they postponed problems to later discussions in the Joint Committee between the parties. As can be seen at the moment though, the UK and EU are again almost at the point of stalemate with no productive outputs to be seen. Businesses treated as cue balls, as ever.

However, not everything is gloom.

Northern Ireland with its privileged customs gateway to the UK as well as its cosy position within the Union's internal market could become a fertile ground for businesses.

It will also be intriguing to watch the EU's and the UK's VAT systems drifting apart over time through the forces of different jurisdiction and changed laws, which could create VAT advantages for businesses. 

And services, for which the VAT border between Great Britain and Northern Ireland bewilderingly vanishes, are set to be another area with potential: When the UK has shaken off the shackles of EU law after the transition period, it will likely be keen to assert its legislative freedom and attract new business. VAT opportunities, especially for financial services, could not be far off.

Get accustomed to mazes. They will be the new reality!