Brexit has been with us for quite some time, yet challenges remain for businesses trading with the UK. Janette Maxwell outlines the practical considerations for Irish importers and exporters
Recent CSO figures show imports from Britain to Ireland fell by 14 percent to €1.8 billion in August 2023 compared to August 2022, and exports from Ireland to Britain fell by 15 percent to €1.3 billion in August 2023 compared to August 2022.
With imports and exports in decline, it’s hard not to look to Brexit and the challenges it has brought as the culprit.
Here are some practicalities to consider when trading with Britain.
Irish-based businesses unwilling to act as importers of record
Where an Irish-based business sources goods from outside the EU, it may not be willing to take on the responsibilities associated with the importation.
To secure these sales, the foreign supplier seeks an Irish VAT registration and an EU Economic Operators Registration and Identification (EORI) number to act as the importer of record on the basis the sales are subject to the incoterm, delivered duty paid.
The foreign supplier is then responsible for the importation of the goods into Ireland and pays the import VAT and any customs duty arising from the importation.
The subsequent sale of the goods by the foreign supplier is subject to Irish VAT, which is returned on the foreign supplier’s Irish VAT return, with the import VAT being claimed as input VAT.
Subject to authorisation from the Irish Revenue, it may be possible for the foreign supplier to use postponed VAT accounting for the imports.
Postponed VAT accounting for imports
An Irish VAT-registered business may apply to the Irish Revenue for authorisation to use postponed accounting for imports. Where this is granted, an importer does not pay import VAT on the clearing of the goods through customs.
Instead, the import VAT is included as output VAT in the Irish VAT return, with the importer claiming input VAT in the same return subject to the deductibility provisions.
There is a requirement to include the customs value of the goods in the PA1 field of the VAT return and in the appropriate fields of the annual return of trading details, i.e. PA2 and PA3 or PA4.
EORI numbers
A business acting as the declarant when importing or exporting goods from the EU must have an EORI number, enabling the EU Customs administrations to deal with customs-related procedures.
An Irish-established business can obtain its EORI by applying to the Irish Revenue. However, a non-EU established business should request its EORI from the EU member state in which it first lodges a customs declaration or applies for a customs decision.
Contracts that would result in a UK VAT registration obligation
Should the Irish business sell goods on delivered duty paid (DDP) terms to a customer in Britain, the Irish business would have to deal with the importation of goods into Britain.
Where DDP terms apply, the Irish business must appoint a UK-established agent and obtain a British EORI number.
The Irish company would also have to register for UK VAT to pay over the UK import VAT arising and to charge UK VAT on the domestic supply of the goods to the customers in Britain.
Postponing the UK import VAT
Import VAT is typically payable at the point of importation into Britain. UK import VAT is liable on goods at the same rate which would apply to the goods had the supply occurred in the UK – i.e. 20 percent.
Like Ireland, the UK government introduced a measure allowing importers to operate a postponed method of accounting for the UK VAT. This means that the payment of import VAT can be delayed until the next VAT return following the date of importation.
The Irish business would self-account for import UK VAT and – subject to the standard VAT recovery rules in the UK and its VAT recovery entitlement – would be entitled to claim a corresponding VAT deduction, potentially providing a cash-neutral position for the Irish business.
It is important to remember that customs duty may also arise, which is non-recoverable and represents an absolute cost for the business.
What’s ahead
At the contract negotiation stage, it is vital that the Irish business understands the impact of the commercial terms to which they are agreeing and, if possible, negotiates more favourable terms which may avoid a UK VAT registration and the associated registration and compliance responsibilities.
It is also essential to keep up to date with VAT legislative developments in the UK and seek UK VAT advice as required, in addition to Irish VAT advice.
Janette Maxwell is a Director of Tax with Grant Thornton Ireland
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