Northern Ireland Protocol Announced - A Post-Brexit VAT Agreement

Dec 30th, 2020

The next stage of Brexit will begin with the new year. The United Kingdom (UK) officially left the European Union (EU) on January 31, 2020. To ease the Brexit transition, the UK has continued to administer value added tax (VAT) under the EU VAT regime. However, on January 1, 2021, the UK will no longer operate under EU rules.

A deal has been reached between the UK and the EU regarding supplies (sales) of goods to or from Northern Ireland (NI) called the Northern Ireland Protocol. EU rules will continue to govern supplies of goods in or from NI. The first article in this series covers that topic.

No similar deal has been reached for supplies of services. Supplies of services within the UK, including NI, will be governed by UK VAT law. When the place of supply is in NI, the supply will be taxed according to UK rules. Conversely, when the place of supply is in the EU, the supply will be taxed according to EU rules.

This ultimately means that supplies of goods in NI will be administered under the EU rules, while supplies of services will be administered under the UK rules.

https://www.gov.uk/government/publications/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021/accounting-for-vat-on-services-between-the-uk-and-eu-member-states-from-1-january-2021

https://ec.europa.eu/info/sites/info/files/brexit_files/vat-services_en.pdf