Please note that the following is all subject to agreement and so is an outline of the current proposed trading landscape for Northern Ireland.
The Windsor Framework, agreed on 27 February 2023, amending the Northern Ireland Protocol, has resulted in various VAT and excise duty changes, to the movement of goods between Great Britain and Northern Ireland. It is designed to restore the smooth flow of trade within the UK internal market, by removing the burdens that have disrupted trade since Brexit, whilst addressing various problems affecting the availability of goods from Great Britain.
The Framework aims to remove red tape and checks for internal UK trade. Goods destined for the EU will remain subject to full EU checks and controls, however, specific arrangements under a new UK internal market scheme, will remove the administrative burden for internal UK movements, for example, food certification and customs declarations for B2C parcel deliveries. New data-sharing arrangements will be introduced, so that internal UK traders can move goods without tariffs, using commercial information and without physical checks, unless there is a specific risk. This is the proposed ‘Green Lane’.
As has been highly publicised, banned products, such as seed potatoes, sausages, and British trees, will move again. In addition, VAT on energy-saving materials, such as solar panels and heat pumps, will be cut and proposed changes to alcohol duties will now apply across the UK.
The Stormont Brake will give the Government the power of veto for new EU rules to apply in Northern Ireland, that can only be challenged through independent arbitration. This means that EU laws will apply only where strictly necessary.
Ultimately, Northern Ireland businesses will have full access to the market in Great Britain, while maintaining access to the whole of the EU market.
Goods movement
The Framework will establish a new UK internal trade scheme for the movement of goods, which will be based on commercial data-sharing, rather than international customs processes. This will expand the range of businesses who can benefit and end the requirement for commodity codes to be provided for each movement and the burden of having to submit supplementary declarations. This will ensure that businesses can move their goods, using available commercial information. There has been mention of a simplified frontier declaration still being required, that can be submitted through the existing Trader Support Service (TSS), but that no supplementary declaration will be required, however, the Framework does suggest that no declarations would be required, unless the goods are destined for the EU (‘Red Lane’).
For businesses that already use the UK Trader Scheme, auto-enrolment in the new internal market scheme will be available and it will be a simple process for new businesses to sign up to.
The Framework will greatly increase the number of businesses able to be classed as internal UK traders and move goods as ‘not at risk’ of entering the EU through three changes:
- Businesses throughout the UK will now be eligible, rather than having to be physically established in Northern Ireland
- The turnover threshold below which companies involved in processing can move goods under the scheme, where they can show the goods stay in Northern Ireland, will be quadrupled from the current £500,000 limit to £2m, meaning four-fifths of manufacturing and processing businesses in Northern Ireland, trading with Great Britain, will be in scope
- Where businesses are above the threshold, they will still be eligible to move goods under the scheme, if the goods are for use in the animal feed, healthcare, construction and not-for-profit sectors and this will apply to intermediaries also, or where selling on the eventual product. Additionally, inputs into food production will continue to benefit from inclusion in the ‘not at risk’ definition
For businesses in the scheme able to demonstrate that their goods will stay in Northern Ireland, the process for goods movements will be much simplified, still using the TSS. The system will use existing data, that businesses already hold about the type of goods being moved, as follows:
- Goods movements will use ordinary commercial data, with information provided to TSS based on sales invoices and transport contracts
- There will be no requirement to provide commodity codes for every movement
- Goods will automatically be treated as internal UK movements for tariff purposes, with no rules of origin requirements
- There will be no customs checks, except in specific risk-based and intelligence-led operations
- Once goods have moved, there is no further process involved, removing the need for a supplementary declaration to be provided for every single goods movement, after goods had arrived in Northern Ireland
However, it is not yet clear who will determine whether goods are for Northern Ireland or the EU and which party would be liable, in the event of a wrong decision. For example, would it be the haulier deciding not to use the ‘Red Lane’, or the business, that may unknowingly fail to declare goods that are destined for the EU.
The system for parcel deliveries will also be radically overhauled. Where previously, a full customs declaration would have been required. The new system will remove the requirements under the EU’s customs code, meaning parcels sent to friends and family in Northern Ireland, will have no requirements on either the sender or recipient.
For B2C E-Commerce deliveries, the requirement for customs declarations, pre-notification and presentation of goods to customs authorities, will be removed. The UK has agreed that authorised parcel operators will manage a process of sharing data, to monitor and manage risk. This will result in Northern Ireland citizens being able to receive parcels from both the UK and EU without delay. The new approach will also apply to prohibited or restricted goods under EU rules, although UK prohibitions and normal carrier terms and conditions will still apply. To allow this, the legal definition of goods classified as ‘not at risk’ of entering the EU, has been changed, to ensure that consumer parcel deliveries are always classified as goods destined to stay within the UK.
For movements between businesses, the same internal market scheme for freight movements will be available, avoiding tariffs and rules of origin requirements.
The above arrangements will be in place from October 2024, giving businesses and parcel operators time to prepare.
VAT and excise
Under the Northern Ireland Protocol, EU VAT and excise rules apply in Northern Ireland, strictly in relation to goods. The Framework secures changes to this, to ensure Northern Ireland will benefit from the same VAT and alcohol taxes applying in the rest of the UK.
The Framework also makes further changes to protect Northern Ireland’s place in the UK’s VAT area, as follows:
- Removal of the limit on the number of reduced and zero rates in Northern Ireland
- Delivers full flexibility on rates, by establishing new categories that can be applied for VAT purposes, where goods are consumed in Northern Ireland
- Protects Northern Ireland’s second-hand car market, by introducing a new scheme, effective 1 May 2023
- Exempts Northern Ireland businesses from a range of EU rules, avoiding the need for around 2,000 Northern Ireland businesses from needing to register for VAT under a 2025 EU Directive
- Avoiding a range of administrative requirements on SMEs and divergence with Great Britain
In addition, the Framework will enable the UK and EU to look at future EU rule changes and make further legal changes, to resolve any distortion.
In summary, the changes will guarantee Northern Ireland’s position within the UK’s VAT and excise area, while still maintaining its arrangements for businesses trading with the EU.
Stormont Brake
The Stormont Brake is introduced as a democratic safeguard, where goods rules applied in Northern Ireland are amended or replaced. Under the Northern Ireland Protocol, these rules were applied automatically, but the Stormont Brake will change that, giving the institutions a role in the decision on whether new goods rules impacting Northern Ireland should apply. The Government would have the power of veto to the application of a new rule applying to Northern Ireland.
The Stormont Brake will apply to changes to EU customs, goods and agriculture rules, within the scope of the original Protocol, with a specific process to follow in order to trigger it.
Next steps
It is intended that the Framework will be approved at the next meeting of the UK-EU Joint Committee, expected to take place during March. The UK and EU will then apply measures to draft into law.
Guidance for businesses will be published in due course, on how the changes will take effect. Some should take effect immediately, or once legislation is in force, whilst others will require further changes to UK systems, or joint work with the EU, in order to take effect.
We will update you accordingly, when more information is available.
Here is our latest article regarding the most up to date changes proposed for the Windsor Framework in 2024.
If you would like to find out more about how the Windsor Framework could impact your business, please contact Sean:
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