The Government will be introducing changes to simplify the way VAT is administered for some goods sold between Northern Ireland and the EU, and some low-value imports into Northern Ireland from 1 July 2021 (otherwise known as e-commerce VAT changes). This mirrors an EU-wide reform, which the UK is implementing in Northern Ireland in line with the obligations set out under the Northern Ireland protocol, where EU VAT rules with respect to goods will continue to apply in Northern Ireland. However, Northern Ireland is, and will remain, part of the UK’s VAT system.
The overall aim of the e-commerce VAT changes is to facilitate the declaration and payment of VAT for (a) sales of goods to consumers between Northern Ireland and the EU; and (b) low-value goods, where they are in consignments valued up to £135 (€150), supplied to consumers in Northern Ireland from non-EU countries, including from Great Britain. The changes will affect businesses and online marketplaces that are involved in these transactions. The consumer experience overall will not change.
On 1 January 2021, the UK introduced a set of new VAT rules for the imports of low-value goods into Northern Ireland from outside the UK and the EU. The EU’s e-commerce reforms mirror many of those changes. Therefore, the Government consider that there will only be minimal changes for businesses selling imported goods to customers in Northern Ireland.
From a UK perspective, the e-commerce changes mean that:
A new single EU-wide distance selling threshold of £8,818 (€10,000) will be introduced for the sales of goods and services in the EU. The threshold will only apply to supplies of EU-located goods to and from Northern Ireland, which means that, EU suppliers who exceed the threshold will have to register for VAT in the United Kingdom if they wish to sell goods to consumers in Northern Ireland;
Online marketplaces will be liable for collecting and accounting for VAT on goods supplied in Northern Ireland, under certain circumstances; and
Low-value consignment relief, which relieves import VAT on consignments of goods of up to £15, will be removed fully in Northern Ireland and across the EU.
Alongside these changes, two new IT systems will be introduced: one for accounting and collecting VAT on sales of goods between Northern Ireland and the EU—the one-stop shop; and the other for accounting and collecting VAT on imports of non-excise goods from non-EU countries, where they are in consignments that do not exceed £135 (€150) in value—the import one-stop shop. Both systems are designed to reduce burdens on business and facilitate the collection of VAT on sales of goods across Northern Ireland and the EU; and are optional for businesses and online marketplaces to use.
The UK will be taking a phased approach to the introduction of these IT systems. HMRC have today published guidance on gov.uk setting out what this will mean for businesses. However, in many cases, if businesses and online marketplaces opt not to register to use these systems, there will be no change in how they declare and pay for VAT on their sales of goods to consumers in Northern Ireland and EU member states.
The Government will legislate for these changes shortly.