Northern Ireland Protocol: Windsor Framework

Under the Northern Ireland Protocol, imposed on 1 January 2021, new checks were introduced. Goods could not be moved via Northern Ireland and across the land border to the Republic of Ireland unless checks took place to ensure that import procedures and customs duties were accounted for and VAT rules adhered to, even if the goods were due to remain in Northern Ireland. This caused an increase of paperwork and additional costs.

The new deal named “Windsor Framework” announced on 27 February 2023, seeks to restore the smooth flow of trade within the UK internal market by solving these issues.

Goods Movements

This agreement puts new arrangements in place through a new UK internal market system (or “green lane”) for internal trade. As a result, goods being sold in Northern Ireland will not have to be checked and will not be subject to unnecessary paperwork and duties.

The new scheme will significantly expand the number of businesses able to move goods using the green lane by being classed as internal UK traders. This will involve three changes:

• Businesses throughout the UK, not just those with physical premises in Northern Ireland, will be eligible
• The turnover limit for businesses involved in processing to move goods under the scheme will be increased from the current £500,000 limit up to £2m
• 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

A further benefit of the new Framework outlines businesses in the scheme that can show their goods will stay in Northern Ireland will gain access to a simplified process for goods movements, using ordinary commercial data rather than customs data.

VAT

With the Windsor Framework, Northern Ireland will no longer be subject to EU VAT and excise rules in relation to goods, but will be subject to the same rules that apply in the rest of the UK.

This will bring the following changes:

• Applying zero rates of VAT to the installation of energy-saving materials such as heat pumps and solar panels
• Ensuring that reforms to alcohol duties, due to take effect this summer, will apply right across the UK from the outset – meaning cheaper pints in pubs and a clearer set of duties overall
• Removing the limit on the number of reduced and zero rates
• Flexibility on future rates, by establishing new categories that can be applied for VAT purposes where goods are consumed in Northern Ireland
• Protecting Northern Ireland’s second-hand car market into the future with a new scheme (with effect from 1 May 2023)

The Windsor Framework will be subject to a vote in parliament, though timings of any vote are yet to be confirmed.

How ZEDRA can help

Our award-winning tax team is ready to advise you on all aspects of doing business internationally and accelerate your expansion into the UK, throughout Europe and beyond.

For further information on the new deal, or if you need any assistance with your UK VAT affairs and compliance, please contact Erika Crocco.