Northern Ireland Protocol
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Northern Ireland Protocol primarily concerns to avoid hard borders between Northern Ireland and rest of the Ireland and furthermore, EU make sure to sustain single market concept in case of supply of goods with Northern Ireland
What does that mean?
Lets understand VAT implication of Northern Ireland Protocol for better clarity.
In case of supply of goods, Northern Ireland considered as part of EU Single market and any supply made between trader established EU member states and Northern Ireland trader then such supply will be treated as Intra-community supply, meaning such supply would be treated as supply between two member states, i.e., no custom formalities, goods can moves freely between such states.
Furthermore, any supply between Northern Ireland and UK will be treated as UK local sale transaction and UK local VAT would be charged in such transaction.
HMRC issued guidelines for the businesses located in Northern Ireland which is doing business with European Union.
According to such guidelines, business in Northern Ireland would require to inform HMRC in requisite form.
Upon receipt of request from such Northern Ireland business, HMRC will add its name to its list of businesses maintained for Northern Ireland protocol and will allow to use its exiting UK VAT number but with “XI” prefix and basis upon such VAT member, Northern Ireland trader will transact with EU member state and such transaction would be treated as intra-community transaction.
However, in case of services, any transaction between Northern Ireland trader and EU trader would be treated as cross border transaction like between EU member state–> Rest of the world, however, if such service transaction between Northern Ireland trader and UK trader, then such supply of services would be treated as Local sales transaction and would be liable to charge with UK’s Domestic VAT.
We hope you must have gain some insight about the Northern Ireland Protocol, however, in case you have any question, please feel free to contact us.
Team Taxation Insight
