The UK government have recently announced the introduction of the Windsor Framework. After years of talks with the EU, the UK reached an agreement on major changes to the Northern Ireland protocol. It follows years of fractions around the NI protocol. This has remained a significant part of the Brexit deal which confirms Northern Ireland’s trade rules.
With crucial and important changes to the rules for movements of goods from Great Britain to Northern Ireland, there are numerous VAT and duty implications to consider. When shipping goods between Great Britain and Northern Ireland, or Northern Ireland to Ireland, a regime of checks and controls have been in place since the UK officially left the EU on 31st January 2020.
We break down the new rules which make up the Windsor Framework, and the impact this will have on businesses within Great Britain, within Northern Ireland, and within the rest of the EU…
What Is The Windsor Framework?
On Monday 27th February, the UK and EU agreed a deal in principle to make changes to the NI Protocol. The new deal, referred to as the Windsor Framework, is intended to:
- restore the smooth flow of trade within the UK internal market;
- safeguard Northern Ireland’s place in the Union; and
- address the “democratic deficit”
The deal will be subject to a vote in parliament, though timings of any vote are yet to be confirmed.
Green Lanes, Red Lanes
A large aspect of the framework is the concept of green lanes and red lanes. This means any British goods staying in Northern Ireland will use the green lane at Northern Ireland ports. They will face minimal paperwork and no routine physical checks.
On the other side, goods due to travel into Ireland (still part of the EU) will use the red lane. That means they’ll face customs processes and other checks at Northern Ireland ports. In order to access the green lane, businesses will need to register as a trusted trader. This can be done under the new UK Internal Market Scheme (UKIMS).
The new scheme will greatly expand the number of businesses able to move goods using the green lane by being classed as internal UK traders. This process involves three changes:
- businesses throughout the UK, not just those with a physical premises in Northern Ireland, will be eligible;
- the turnover limit for businesses involved in processing to move goods under the scheme will be quadrupled to £2m; and
- those with turnover above the threshold will be eligible to move goods under the scheme, if those goods are for use in the animal feed, healthcare, construction, and not-for-profit sectors.
Businesses in the scheme that can provide evidence their goods will stay in Northern Ireland will gain access to a simplified process for goods movements. This will be determined using ordinary commercial data rather than customs data. Goods moving to the EU will be subject to normal third-country processes and requirements.
Food & Single Market
Another major talking point of the new Windsor Framework is the removal of a ban on certain foods entering the single market. Under the original protocol, some Great Britain products which the EU deems higher risk, such as fresh sausages, would have been banned from Northern Ireland. Under the new rules, the new agreement means UK public health and safety standards will apply for all retail food and drink in the UK internal market.
Something else which will be affected will be online shopping. Under the original protocol all parcels sent from Great Britain businesses to Northern Ireland consumers would require a customs declaration. Many suppliers within Great Britain decided to cut ties to NI customers due to the amount of protocol and checks needed. This was despite a grace period implemented.
The new Windsor Framework confirms this grace period as permanent, pending requirements for logistics companies. Under the terms, authorised parcel operators will need to share data with the UK government. This is to monitor and manage any risks of smuggling into the EU market. This data-sharing process should begin by September 2024.
VAT & Duty On Alcohol
One of the most under-reported yet probably one of the most significant parts of the Windsor Framework is down to VAT and excise duties. Previously, Northern Ireland followed EU rules when it came down to VAT and excise applied to goods. This restricted certain UK tax changes coming into effect within Northern Ireland. For example, the introduction of a VAT zero rate for energy-saving materials from being applied UK-wide.
However, the new Windsor Framework enables Northern Ireland to remove themselves from EU rules on the structure of excise duties. This means that a new UK plan which is focused on taxing beverages based on their alcoholic strength can apply in Northern Ireland. As well as this, it will also ensure that the planned reforms to alcohol duty can apply UK-wide.
It will also allow Northern Ireland to apply zero rates of VAT to the installation of energy-saving materials. The UK can now then apply reduced VAT rates on goods supplied and installed in immovable property within Northern Ireland. For example, solar panels being installed in a house. This even applies if UK VAT is below EU minimum rates. The UK can also apply reduced VAT rates to a higher number of categories of goods than permitted under EU law.
We hope this has outlined to you the details behind the Windsor Framework and how businesses will be affected. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.