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Trading under the NI protocol – part 3: Other matters

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After previously discussing VAT issues under the Northern Ireland Protocol, Jason Croke outlines the other issues and opportunities businesses should consider when trading goods with Northern Ireland.

19th Oct 2021
VAT Director Rayner Essex
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In the first part of this series I looked at the opening of the One Stop Shop (OSS) for Northern Ireland businesses, and then in part two I provided some clarity on the many potential opportunities of trading under the NI protocol. In this third part I will look a little closer at XI EORI numbers, import duty and more.

VAT post-Brexit, OSS and trading under the NI protocol are some of the topics I will be covering during my AccountingWEB Live Expo business tax seminar on 2 December in Coventry. 

1: XI EORI number

A business trading under the NI Protocol should have an XI EORI number. If it does not have one, it first must obtain a GB EORI number. The business can apply for both numbers at the same time or consider registering for the Trade Support Service (TSS).

The XI EORI number is not a new VAT number/VAT registration. The XI EORI will be based on the existing UK VAT number. For example, if the UK VAT number was 123-4567-89, a GB EORI number would GB123456789000 and the XI EORI would be XI123456789000.

Moving goods from Northern Ireland to the EU would use the XI EORI number so that the freight agent/shippers can identify the goods as “coming from the EU” and therefore not subject to import VAT/duty, when those goods enter an EU member state having come from NI.

How TSS can help

The Trader Support Service can handle the import declarations on goods coming into Northern Ireland. The business is still responsible for filing EC Sales lists, completing their VAT return correctly and any other import declarations outside of NI. For example, if an NI business brings goods in from GB for onward movement to Ireland, the TSS will assist with the GB to NI movement, but the intra-EU movement between NI and Republic of Ireland is something the business continues to manage itself.

Businesses don’t have to use the TSS, it is only a temporary service to give businesses time to adapt to Brexit. They can rely upon their own customs agent or indeed the company transporting the goods.

2: Import Duty

The single market seeks to protect itself, and there is a risk GB goods could enter the EU via Northern Ireland.

Example 1

GB business orders goods from China which are all shipped to GB first. Some of those goods remain in GB and remainder go to NI to service all the of Irish markets. 

The NI Protocol applies a simplification – where goods are deemed “not at risk”, they can move without import duty being applied. Not at risk is defined as goods which have a nil import duty either because the EU applies no duty to those specific goods or because the goods meet the rules of origin requirements.

A movement as per example 1, would not cause an issue for a GB manufacturer making say office chairs and those chairs are shipped into the EU via NI, because if those goods were shipped from GB directly into EU they would also be duty free having met the rules of origin.

Excise items such as tobacco, alcohol, and other goods which do have an import duty rate applicable, or don’t meet the rules of origin, need careful descriptions on the paperwork. It is important to ensure the freight agent/shipper has all the documents they need to ensure the smooth passage of the goods.

3: EC Sales Lists (ECSL)

Businesses operating under the NI protocol and who make sales to EU member states such as Ireland, will be required to declare these on an EC Sales list and also on the UK VAT return. Box 8 is used to show the value of sales to EU business customers and the associated ECSL is used to record the business customers EU VAT numbers, values, etc.

Likewise, a business operating under the NI protocol which buys in goods from the EU will use its XI EORI number to identify itself as an ‘EU’ business, and can then apply the reverse charge rules on the UK VAT return. This is box 9 for the net value, box 2 for the self-declared output tax and box 4 if the VAT in box 2 is eligible for VAT recovery or is not partially exempt.

4: EU VAT Refunds

Where a business operating under the NI protocol incurs EU VAT, it will be able to submit an 8th Directive refund claim for that EU VAT via the HMRC website.  

Conversely a GB business that is not operating under the NI Protocol, has to file a 13th directive claim directly with the EU member state where is incurred the VAT. Eligibility and deadlines are mainly as existed before pre-Brexit.

When submitting a claim via the HMRC portal, the business will be required to have an XO EORI number.

NI Protocol businesses incurring VAT on EU supplied services received in EU member states cannot reclaim VAT via the 8th directive/HMRC portal route, instead it would need to submit a claim same as a non-EU business. See the HMRC guidance on VAT refunds.

VAT opportunities

There may be planning opportunities for some GB based businesses already eligible under the NI protocol or who can make themselves eligible under the NI Protocol.

To remind ourselves, the NI protocol applies to any business that:

  • sells goods that are located in Northern Ireland (NI) at the time of sale; or
  • receives goods into Northern Ireland from an EU VAT registered business; or
  • sells or moves goods from Northern Ireland to an EU member state.

It is therefore feasible for a GB based business to meet one of the above conditions and by virtue of that, open up access to the EU in terms of the simplifications previously enjoyed before Brexit.

For example, one issue of Brexit was the loss of triangulation. The GB EORI/GB VAT number is no longer recognised as an EU identification, but an XI EORI number is recognised as an EU number.  Likewise, there may be advantages to routing EU sourced goods via Northern Ireland before their final destination into the UK.

It would depend on many different factors, so what works for one trader may not work for another. 

Having a branch or establishment in NI with a Northern Ireland address is also something to consider. From experience to date, some EU member states don’t recognise the XI EORI number as being eligible for triangulation and other EU simplifications and often this is because the invoices or paperwork show an XI EORI but with a GB address and the GB address indicates a GB business not a NI business and some EU suppliers themselves are not necessarily conversant with the rules of Brexit or the NI protocol. 

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Jason Croke will be speaking more about VAT and Brexit at AccountingWEB Live Expo on 2 December 2021. You can register now to attend Jason’s ‘Business Tax: VAT and post-Brexit update’ session today.

Replies (2)

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By chodgkins1
20th Oct 2021 12:36

Could you confirm the use of XI or GB prefix VAT Number requirements on Invoices sent by Northern Ireland Registered Businesses. I'm led to believe that the XI prefix should be included if the Invoice is for the Sale of Goods to a Customer in another EU country, for all other scenarios the GB prefixed VAT number should be shown on the Invoice. Is this correct ?

Thanks

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Replying to chodgkins1:
Jason Croke
By Jason Croke
26th Oct 2021 16:09

Your understanding is correct.

The NI protocol is only about goods, not services. At the end of the day we are talking about a single "UK" entity with a single UK VAT number, but with a GB and XI EORI number, the XI EORI is used for goods moving to/from Northern Ireland, whilst the GB EORI is used for goods moving to/from GB and also for any services.

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