On 27 February 2023, details of the Windsor Framework were revealed. The Framework aims to address issues with the application of the Northern Ireland Protocol, including trade friction. From a tax perspective, the Framework could have important ramifications for VAT, excise and customs.
Customs:
Under the terms of the Framework there would be no requirement to collect export declarations for a significant majority of trade from Northern Ireland to Great Britain. This is in line with current practice, but export declarations could have been required if the terms of the original Protocol were implemented in full.
For trade in goods from Great Britain to Northern Ireland a new ‘green lane’ for authorised traders would be extended so that most customs formalities would no longer be required with an aim to streamline the requirements for these movements of goods. It is expected that the only checks will be risk and intelligence based to protect against smuggling and criminality resulting in less of a burden for businesses.
Some goods would not be able to use the green lane (e.g. goods ‘at risk’ of entering the EU via Northern Ireland). For such goods a new tariff reimbursement scheme will be introduced where it can be demonstrated that goods did not ultimately enter the EU.
The Framework also provides for removal or simplification of customs procedures in respect of parcels moving from Great Britain to Northern Ireland.
VAT:
The Framework provides for increased flexibility over VAT rates in Northern Ireland. In particular, the zero-rate would be permitted for goods supplied and installed in immovable property located in Northern Ireland.
This flexibility appears to pave the way for alignment of the rules on energy-saving materials between Great Britain and Northern Ireland (there is currently divergence).
Limits on the number of reduced and zero rates in Northern Ireland would also be removed.
Northern Ireland would be exempted from changes to the small business VAT regime across the EU that are due to come into force in 2025 and which could result in a requirement to lower the VAT registration threshold in Northern Ireland.
Excise duty
Increased flexibility would be permitted over excise duty rules with the apparent effect that changes to UK alcohol duty rules (due to come into effect from August 2023) will be able to apply both in Great Britain and Northern Ireland.
On 27 February 2023, details of the Windsor Framework were revealed. The Framework aims to address issues with the application of the Northern Ireland Protocol, including trade friction. From a tax perspective, the Framework could have important ramifications for VAT, excise and customs.
Customs:
Under the terms of the Framework there would be no requirement to collect export declarations for a significant majority of trade from Northern Ireland to Great Britain. This is in line with current practice, but export declarations could have been required if the terms of the original Protocol were implemented in full.
For trade in goods from Great Britain to Northern Ireland a new ‘green lane’ for authorised traders would be extended so that most customs formalities would no longer be required with an aim to streamline the requirements for these movements of goods. It is expected that the only checks will be risk and intelligence based to protect against smuggling and criminality resulting in less of a burden for businesses.
Some goods would not be able to use the green lane (e.g. goods ‘at risk’ of entering the EU via Northern Ireland). For such goods a new tariff reimbursement scheme will be introduced where it can be demonstrated that goods did not ultimately enter the EU.
The Framework also provides for removal or simplification of customs procedures in respect of parcels moving from Great Britain to Northern Ireland.
VAT:
The Framework provides for increased flexibility over VAT rates in Northern Ireland. In particular, the zero-rate would be permitted for goods supplied and installed in immovable property located in Northern Ireland.
This flexibility appears to pave the way for alignment of the rules on energy-saving materials between Great Britain and Northern Ireland (there is currently divergence).
Limits on the number of reduced and zero rates in Northern Ireland would also be removed.
Northern Ireland would be exempted from changes to the small business VAT regime across the EU that are due to come into force in 2025 and which could result in a requirement to lower the VAT registration threshold in Northern Ireland.
Excise duty
Increased flexibility would be permitted over excise duty rules with the apparent effect that changes to UK alcohol duty rules (due to come into effect from August 2023) will be able to apply both in Great Britain and Northern Ireland.
