Business with Northern Ireland after Brexit

The European Commission has prepared a draft of changes to the VAT rules applicable to trading with Northern Ireland. The draft has been submitted as part of the preparations for Brexit at the end of this year. The new rules adjust the existing regulations to comply with the Protocol on Ireland/Northern Ireland that regulates post-Brexit relations between the UK and Ireland.

The United Kingdom ceased to be a member of the EU on 31 January 2020. On 1 January 2021, after the end of the transition period, both citizens and businesses will fully feel the consequences of the UK’s withdrawal from the EU. Where trading in goods is concerned, changes are to be expected not only in the customs and tax area but also in marking and labelling of goods and obtaining various permits. As for the provision of services, it is necessary to prepare for changes relating to financial, transport and electronically provided services and to the recognition of certificates and qualifications.

A communication on readiness at the end of the transition period between the European Union and the United Kingdom” should help the UK in its transition to sovereignty in most affected areas, assessing the readiness of not only the UK economy for Brexit in individual areas such as VAT, customs and excise duties.

The European Commission also dealt with the EU VAT rules that will cease to apply to the UK but will remain in application in Northern Ireland to prevent the creation of a hard border between Ireland and Northern Ireland. This will lead to the existence of a mixed VAT system in Northern Ireland: trading in goods will be governed by the harmonised EU rules, whereas the provision of services will be governed by the UK rules. This system will require that taxable persons delivering goods to Northern Ireland have EU identification numbers for VAT purposes that should be assigned to these persons under EU rules but, at the same time, must be different from other numbers assigned under UK rules, i.e. those starting with “GB”.

Since Northern Ireland does not have any special designation within the two-letter code system, the European Commission proposes the introduction of a special “XI” prefix for Northern Ireland to be used for VAT identification number purposes. If the proposal is approved, the directive will enter into effect on the first day following the date it is promulgated in the EU’s Official Journal.
All parties involved should prepare themselves as best as they can for the upcoming changes. We will keep you informed about any future developments in this area. 

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