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Windsor Framework – EU UK Northern Ireland Protocol replacement

Northern Ireland Protocol replacement removes most customs controls; gives back many reduced VAT and excise rates powers to UK; and introduces ‘Stormont Brake’ to Northern Ireland Assembly to block EU rules changes in the province

The UK and EU have agreed today the Windsor Framework to replace the 2020 Northern Ireland Protocol. This was the Brexit settlement alongside the UK-EU Withdrawal Agreement that gave the province a dual position within the UK and the EU ‘s Single Market, Customs Union and VAT regime for goods. This position was settled to prevent the need for goods controls and checks at Republic of Ireland – Northern Ireland border. However, difficulties in interpretation and application of EU rules in the province rompted the UK to propose its Northern Ireland Protocol Bill last year which could unilaterally overrule elements of the Protocol and threaten a EU-UK trade dispute.

The Windsor Framework will now be subject to UK Parliamentary review and vote. There are many positives in the deal, but questions on state aid (see below) may cause problems for Unionist MP’s in Westminster looking for areas of friction. Future problems will inevitably arise if and when the UK diverges from the EU rules and standards, and how this will be managed through the Framework. If successful in approving the Framework, the UK government will withdraw its Protocol Bill.

Aside from a range of trade, governance and administrative issues (see list below), the UK will take more control under the Framework of reduced VAT rate setting for immovable goods and excise rates for Northern Ireland goods. For example, the EU 2025 SME VAT Directive will not apply to nearly 2,000 businesses with Northern Ireland to Great Britain trade.

Stormont Brake, ending most customs controls via ‘green lane’ and the role of the ECJ

The Windsor Framework makes some of the following changes as it replaces the Protocol.

  • Stormont Brake‘ will give some influence for the Northern Ireland Assembly on future ‘significant’ EU legislation changes and its application in the province for EU customs, goods and agriculture rules within the scope of the Protocol. NOT a veto; but an opportunity for a ‘Petition of Concern‘ based on 30 MLA’s (Members of the NI Legislative Assembly) to pass the issue to UK’s Westminster to consult and determine implications and if to block. It then enters into a discussion period with the EU. In the case that it does, this would mean potential ending of Northern Ireland’s dual position in the EU Single Market. The Stormont Brake is not subject to ECJ oversight – instead independent international law. It this early stage, it seems broadly similar to ‘right of reservation’ in Norway etc’s EEA agreement with the EU. This has only been invoked once.
  • The ECJ will still remain the final arbitrator on disputes; but the Brake would shift the emphasis and many contentious issues have been resolved avoiding any likely disputes and need for the ECJ.
  • A new Green Lane for registered Trusted Traders now extended, which means that goods staying in the UK will be freed of most old Protocol paperwork, checks and duties, with only ordinary commercial information required such as a description of the goods and their value at a super high level via the Trader Support Service (TSS). There will be no need for commodity codes and supplementary declartions. This will be open not just to NI traders (current) but those from other parts of the UK – although those will need a customs representative.
  • Other goods from the UK, destined for the EU via Northern Ireland, will pass through a Red Lane. These will be subject to full EU customs, food and animal health checks as well as customs declarations requirements.
  • A new food retail green lane for moving agri-goods to Northern Ireland from the rest of the UK will give swift passage through any EU SPS (Sanitary and Phytosanitary) controls or customs declarations requirements. This is an expansion of the green lane for UK food retailers: the Northern Ireland Retail Movement Scheme. Supermarkets, wholesalers, hospitality and catering companies and those providing food to public services (e.g. schools, hospitals) will all be able to use the green lane. And such agri-food must include a ‘not for EU‘ label.
  • Ending the full checks and customs declarations requirements on parcels movements sent by private persons or GB businesses to private persons in Northern Ireland.
  • Further progress on medicines, allowing any drugs licenced in the UK to be used in Northern Ireland.
  • There is no change from the Protocol to state aid and subsidy controls. This could be of concern to the Unionist parties.
  • There will be no dual regulatory regime for goods as some had wanted or even feared
  • Other points waiting clarification:
    • Safeguards in the case of the UK and EU diverging significantly from the current standards the UK inherited from the EU; and
    • data sharing arrangements;

UK secures wider rights to set VAT and excuse rules on goods going to Northern Ireland only

One contentious area was the EU’s control over setting the broad rails of VAT rates on goods – now reversed by the Windsor Framework. Within the EU VAT regime, the rules do not control the standard VAT rate of member states – except that it must be at least 15%. But it does have some limits on the reduced VAT rates and what supplies may benefit from them. These restrictions apply to goods in Northern Ireland under the Protocol.

This was highlighted on UK VAT cuts and Northern Ireland’s position. When the UK cut VAT to zero on solar panels in 2022 this could not be introduced in Northern Ireland because of the Protocol. The Northern Ireland Democratic Unionist Party, the main pro-UK party, has been insistent that such variations between Northern Ireland and Great Britain (UK minus Northern Ireland) are prevented.

The Framework makes changes to permanently protect Northern Ireland’s place in the UK’s VAT area:

  • It removes the limit on the number of reduced and zero rates for immovable goods in Northern Ireland, ensuring parity across the United Kingdom – although this must first be discussed and agreed with the EU to limit potential frauds.
  • It delivers flexibility and scope for cooperation on rates in the future, by establishing new categories that can be applied for VAT purposes where goods are consumed in Northern Ireland. The EU and UK will form a joint committee to review which products may or may not enjoy the UK rates – with the focus on goods that cannot or unlikely to be transported into the EU from Northern Ireland.
  • It protects Northern Ireland’s second-hand car market into the future with a new scheme to take effect from 1 May 2023
  • It exempts Northern Ireland businesses from a range of EU rules: saving 2,000 Northern Ireland businesses from needing to register for VAT under a 2025 EU Directive; and avoiding a range of other new requirements on SMEs, and divergence with Great Britain.
  • And it establishes a brand new mechanism, first proposed in the UK’s 2021 Command Paper, enabling the UK and EU to look at future EU rule changes and make further legally binding changes to resolve any distortive impacts that new EU red tape could cause.

VAT already features in a number of EU-UK Brexit infringement proceedings.

Any settlement though will not resolve future difficulties, including UK and EU VAT in the Digital Age issues.


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