The UK left the EU on 31 January 2020 but has retained the key elements of membership during a ‘transitional phase’. On 31 December 2020, the transitional phase will end. Negotiations continue apace and will no doubt do so throughout 2021. After this date, EU laws, membership of the single market and customs union, EU trade policy and ongoing budgetary commitments will not apply to the UK.
What does this mean for business across the Republic of Ireland and Northern Ireland?
Given the land border, the island of Ireland is of course in a unique position vis a vis Brexit. Given this, businesses both sides of the border have many important questions, such as:
- How will this affect our payroll and employment tax compliance for our employees who live in the Republic of Ireland but work in Northern Ireland or vice versa?
- If Brexit gives rise to currency fluctuations will cross-border workers seek compensation? How does this fit into current assignment policies?
- Inevitably Brexit will give rise to employees travelling or commuting as short-term business visitors: what will the UK/Irish payroll tax implications be? Will immigration matters need to be considered? Will there be additional employment costs if Northern Ireland no longer subscribes to EU Social Security regulations that prevent dual contributions for cross-border employments?
- The EU social security rules will expire at the end of the transitional period. The UK and Ireland has entered into a Bilateral Agreement on Social Security which will broadly replicate the EU provisions however a number of practical questions remain e.g. will current A1 certificates remain valid? What does our business need to do to ensure that we can continue to trade across the border? And will we need to set up an establishment in multiple jurisdictions?
- Will the treatment of goods liable to Excise duty (alcohol, etc.) be different to the trade in normal goods that move into Northern Ireland from Great Britain and the Republic of Ireland?
- What impact will there be on tax reliefs for Northern Ireland-headquartered companies operating in the Republic?
- What impact will this have on VAT where we are sending good across the border, especially those goods ordinating in Great Britain? Supply chains need to be reviewed and the impact of Brexit considered on VAT reporting.
- The likelihood of the imposition of further customs checks and the impact on the island of Ireland’s status as a single epidemiological area.
Some insights from our team:
- For customs and VAT purposes, Northern Ireland remains in a unique position. It retains a foot in both the EU Single Market and the UK Customs Union. As a result, goods moving from the EU into Northern Ireland as deemed to be an intra community supply and free from duty and goods travelling from GB to Northern Ireland are also free to move unhindered by tariffs. The Government and EU have pledged that no new customs formalities or documents will be required other than the existing health and animal control certification and inspection requirements. However, goods moving from GB to Northern Ireland will require a safety and security declaration to ensure that the goods do not ‘leak’ into the EU. Control of these ‘at risk goods’ to protect the integrity of the EU Single Market is the cause for more contention.
- A system of additional EORI prefixes have been launched via the Trader Support Service (TSS) website. These additional EORI prefixes (e.g. XI) will be needed to denote goods being traded/moving in Northern Ireland. Traders registering with TSS will automatically be allocated these EORI prefixes. However, traders are urged to have these numbers ready and register with TSS.
- To operate within a customs regime, Irish importers of goods need to be customs registered. If not already registered, an application should be filed with Irish Revenue via Revenue’s Online Service (ROS) for an Irish EORI (Customs) number to import or export goods to/from Ireland.
- There should be no change to the tax treatment of cross-border workers after 31 December 2020. However, the position on social security may change, depending on whether the UK continues to be party to the EU-wide social security agreement. Dual liabilities may arise where no agreement is reached.
- Businesses that wish to export goods or import goods acting as the Exporter or Importer of Record need to consider being established in the customs territory where they wish to make the declaration unless they use a special type of customs representation via their customs agent or logistics/shipping agent.
- British companies exporting alcohol or tobacco products to Northern Ireland will be faced with submitting customs documentation in accordance with the NI Protocol agreed with the EU.
- The UK will reintroduce VAT Postponed VAT accounting to remove the requirement to pay Import VAT at the frontier and help importers’ cash flow.
How can we help you prepare?
While there is still a great deal of uncertainty, we have a team of experts in Ireland and the UK who can help guide you through the run up to 31 December 2020 and beyond. A joined-up approach across UK and Irish tax matters is essential.
If you would like to discuss your specific circumstances in more detail, please get in touch with your usual Blick Rothenberg contact or one of the partners on this page.
This article has been written in partnership with Tom Mahon and Olga Miller of Warren & Partners a tax advisory firm based in Dublin, who will assist us in providing you with joined-up tax support.