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UK Northern Ireland Brexit complexities on EU VAT in the Digital Age

HM Treasury – how proposed EU ViDA overlaps and complicates Northern Ireland’s post-Brexit position in EU VAT regime for goods

The UK’s HM Treasury has issued a policy paper discussing how elements of the EU’s proposed VAT in the Digital Age (‘ViDA’) reforms may affect goods VAT reporting with Northern Ireland (NI). This could result in secondary EU complex obligations for NI taxpayers and HMRC from as soon as 2024.

The UK’s failure to fully implement in NI the EU’s 2021 IOSS VAT reforms under the Northern Ireland Protocol Brexit deal is already the subject of a EU Brexit infringements arrangements dispute. The new potential EU obligations for NI traders – which the UK has to administer under the NI Protocol – will add to the bureaucratic burden and causes for friction between the EU and UK.

Single EU VAT registration gives immediate issues

HM Treasury sees the Single VAT Registration extension of the OSS VAT return as the initial change to digest. Traders moving B2C goods between NI and the EU already may use OSS (rest of UK to EU may not since an import) since July 2021. The proposed extension to B2C transactions of movement of own good within the EU will now be added under ViDA from 2025.

The mandatory application of the reverse charge for B2B intra-community goods movements will similarly create complexity for HM Treasury and HMRC to operate.

Also coming in 2025 is the extension of VAT deemed supplier for accommodation and ride sharing platform proposals. Since this is services, this is not within the NI Protocol agreement.

2028 Digital Reporting Requirements and NI

Further down the track, the proposed obligation for digital reporting of intra-community supplies (including between NI and EU) will become subject to 2-day live reporting obligations. This reform, under the ‘Digital Reporting Requirements’ pillar of ViDA will again, for NI-based traders, will have to be managed by HMRC. This requires major investment in existing systems and complexities for taxpayers to identify which regime – UK or EU – follow.

NI traders selling or moving goods to and from the EU will also have to accept EU e-invoicing requirements to issue and send structured electronic invoices. If Ireland takes-up the proposed EU option to impose structured e-invoices from 2024, then the will put further secondary obligations on NI-based taxpayers.

The third pillar of ViDA, Platform Economy deemed supplier, will be less problematic since it applies to services, which are outside of the NI Protocol.

Northern Ireland dual position in EU VAT regime

In 2021, NI took up a dual position in the EU Customs Union, Single Market and VAT regime as well as in the UK’s equivalents for goods only. The rules of engagement for this were contained within the Northern Ireland Protocol, which accompanied the January 2020 Withdrawal Agreement which, in turn, sealed the UK-EU exit terms.

The aim was to avoid the needs for border controls between NI and the island of Ireland (IE) instead, moving any checks onto the goods moving between GB and NI with an eventual EU destination to the GB/NI border. So, while the term ‘border in the Irish Sea’ has become popular, it is actually a border at the NI ports.

Preparing EU OSS or regular VAT returns is complicated, time consuming and high with tax liability risks.  VAT Calc’s single platform VAT Filer can accurately complete any country filings with verified transactional data from our VAT Calculator or VAT Auditor integrated tools.



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