Independent VAT Consultant
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Brace for Brexit 16: Moving goods from GB to NI

Neil Warren explains how VAT will work when the EU transitional period ends on 31 December 2020, for transfers of goods from Great Britain into Northern Ireland.

15th Dec 2020
Independent VAT Consultant
Columnist
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Brace for Brexit - moving your own goods from GB to Northern Ireland

New VAT reverse charge

When you move your own goods from Great Britain (GB) to Northern Ireland (NI), a new self-assessed tax will be due on your VAT returns if the movement takes place after 31 December 2020.

Output tax will be paid in Box 1 and the same amount claimed as input tax in Box 4, based on the value of the goods in question. However, as with all reverse charge VAT entries in Box 4, it needs to take into account private, non-business or exempt use. This means an extra challenge for a partially-exempt business, such as an insurance broker.

Example 1: Insurance broker

ABC Insurance Brokers has offices in Birmingham and Belfast (in GB and NI). It purchased 20 computers in January 2021 from a supplier in Birmingham and didn’t claim input tax because the goods relate to its exempt supplies as an insurance broker. They cost £1,000 each plus VAT.

However, six of the computers are subsequently transported to ABC’s office in Belfast, for use by staff working there. This movement of goods should not be subject to customs duty when they cross the sea because they are “not at risk of moving into the EU.” But the new VAT reverse charge will apply here and that causes a complication for ABC and any partially exempt business.  

Reverse charge

If ABC had been a taxable business such as a firm of accountants, VAT would not be a problem: input tax would be claimed on the original purchase of the goods from the Birmingham supplier and the reverse charge entry when they move from Birmingham to Belfast will be self-cancelling, so that output tax of £1,200 (6 x £200 per computer) is paid in Box 1 and the same amount claimed as input tax in Box 4.

But there is a problem for ABC because of its partially exempt status, which must be dealt with as follows:

  • No input tax will be claimed in Box 4 with the reverse charge entry. VAT of £1,200 is declared in Box 1 of the VAT return (£1,000 x 6 x 20%) but nil is recorded in Box 4;

ABC has now had a double VAT hit; an input tax block on the original purchase of the goods in Birmingham, and with the subsequent reverse charge when they move to Belfast.

However, HMRC confirmed in its guidance for moving goods between GB and NI that the original input tax block on the purchase of the computers can be reversed, meaning a Box 4 input tax entry of £1,200 when the goods move to Northern Ireland. The intended outcome of partial exemption has been restored and the double taxation problem has been removed.

Group registrations

It has been a long-standing principle of VAT that you ignore transactions that take place within the circle of a VAT group. That is no longer the case if a movement of goods takes place from GB to NI.

Example 2: Clothing retailer Clothes GB Ltd sells stock to fellow VAT group member Clothes NI Ltd and the goods move from GB to NI. A reverse charge entry is needed in the same way as considered above. However, this is not a problem for the group because clothes retailers are fully taxable.

A separate twist for VAT groups is that a reverse charge entry is also applicable to intra-group supplies of goods that are already located in Northern Ireland, where one or both group members only have establishments in GB.

Conclusion

Who was it that said that VAT is a simple tax?

The issues considered in this article prove that is definitely not the case, but the intentions are good, to help implement the Northern Ireland Protocol that should ensure smooth trading in goods between NI and Ireland.

Note the reverse charge rules considered in this article do not apply to your own goods moved from NI to GB, only the other way around.

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