VAT accounting: NI and GB

HMRC has updated its guidance Changes to accounting for VAT for Northern Ireland and Great Britain from 1 January 2021 covering the sale of goods from Great Britain to an EU member state via Northern Ireland. It makes clear that the VAT treatment depends on where the goods are at the time that the transfer of the rights to the goods takes place.

When transfer of the rights takes place whilst the goods are in Great Britain, the supplier may zero-rate the sale to the EU customer but must also account for import VAT on the movement from Great Britain to Northern Ireland, and then recharge this import VAT by including it on the sales invoice. It appears that the UK seller has to both zero-rate the sale and simultaneously include an amount equating to the import VAT on its invoice. This will presumably have to be identified as a separate amount so that the EU customer may make a claim for repayment (or include the amount on its UK VAT return, if it is registered for UK VAT). However, it appears that the position is simplified if the goods are declared on importation into Northern Ireland for the Onward Supply or Transit procedures.

When transfer of the rights takes place whilst the goods are in Northern Ireland, there will be a movement of the supplier’s own goods from Great Britain to Northern Ireland, followed by a supply for acquisition. The import VAT incurred at the Great Britain/Northern Ireland border will be recoverable by the supplier as input tax; the subsequent supply for acquisition to the EU customer will be zero-rated.