Great Britain has now left the EU. At the end of the Brexit transition period, UK and Irish Governments introduced Postponed VAT Accounting.
While Great Britain has left the EU and is now referred to as a ‘third country’ for VAT purposes, EU VAT rules continue to apply in Northern Ireland.
This means that businesses who import goods from Great Britain must pay VAT at the point of entry onto the Island of Ireland. However, there are different rules depending on whether the importer is in Northern Ireland or in the Republic of Ireland.
Postponed VAT Accounting | Ireland and Northern Ireland
Siobhan McCreesh from FPM’s Brexit Consulting Team explains what this means for businesses on the Island of Ireland and answers your commonly asked Questions:
Certain VAT changes came into force at the end of the Brexit transition period. This may create cash flow challenges for many businesses. Luckily, the UK and Irish Governments have introduced Postponed VAT Accounting.
Subject to certain conditions, this allows businesses to pay and reclaim import VAT on the VAT return for the period in which the import takes place. This removes the need to pay import VAT upfront and reclaim it at a later date. It also overcomes the cash flow difficulties that would otherwise arise for many businesses.
Northern Ireland VAT treatment of imports
Where a Northern Ireland business imports goods from a third country, it can avail of Postponed VAT Accounting. However, as Northern Ireland remains part of the UK VAT system, imports to Northern Ireland from Great Britain are treated as a domestic supply. GB suppliers will continue to charge UK VAT and Northern Island businesses can reclaim input VAT (where applicable).
ROI VAT treatment of imports
As stated above, the transition period has now ended. In the Republic of Ireland, Great Britain is now treated as a ‘third country’ for VAT purposes. Goods imported from third countries are subject to import VAT at the point of entry into Ireland. This is unless the importer has a VAT deferral account. Previously, where import VAT was paid, it could be reclaimed (subject to entitlement to recovery) at a later date.
With the introduction of Postponed VAT accounting, businesses will be able to pay and reclaim import VAT in the same VAT period. This will eliminate the potential cash flow problems associated with import VAT. Due to the significant trade between GB and the ROI, this should be of great benefit to Irish businesses.
Who can apply for Postponed VAT Accounting and do I need to register?
Postponed VAT Accounting, which applies to all imports from third countries, is only available to VAT registered businesses. While businesses do not have to register, they will need to liaise with their freight forwarders. This is to ensure that Postponed VAT Accounting details are correctly set out in the relevant customs documentation.