VAT ALERT - Proposed Amendments to the VAT Consolidation Act 2010 as a result of the “Brexit Omnibus Bill”

On Friday 22 February 2019, the Irish Government published the “Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019”, referred to as the Brexit Omnibus Bill. The Bill proposes changes to Irish legislation to be ratified in the event of the UK leaving the EU without an agreement on 29 March 2019.

The changes proposed to the VAT Act are as follows:

Postponed Accounting for VAT on Imports

The Bill provides for the introduction of postponed accounting for VAT for all importers who are registered for VAT in Ireland. Effectively this means that Irish VAT registered importers will be in a position to self-account for the VAT due in their VAT return rather than paying import VAT upfront at point of entry into Ireland.

The introduction of postponed accounting will ensure that imports of goods from the UK, in a no-deal scenario, will be treated in the same way as goods currently acquired from the UK as intra-Community acquisition.

While postponed accounting has undoubtedly been introduced to relieve the cash flow impact on businesses that acquire goods from the UK following Brexit, it will also benefit businesses who import goods from other non-EU countries as the scheme will be available to all importers and not just for importers of goods from the UK.

As set out above postponed accounting will initially be available to all importers but the new legislation provides for the introduction, at a later date, of certain criteria and conditions which must be met by importers in order for them to continue to avail of postponed accounting on imports.

Section 56B Authorisations

Although not required by Brexit, the Bill also proposes changes to Section 56 of the VAT Act. This section provides for the zero-rating of certain goods and services acquired by qualifying persons, generally exporters, which have been issued a 56B authorisation by Irish Revenue. We understand that the Section 56 scheme is being modified “in order mitigate the potential for abuse and to retain the purpose of the relief”. The proposed amendments include changes to the definition of a “qualifying person” and additional conditions to be met by qualifying persons.

The updated definition of a “qualifying person” will provide that a VAT registered trader must meet the 75% turnover test “for the period of 12 months immediately preceding the making of an application". This, if implemented, will prevent traders in a start-up scenario from obtaining a 56B Authorisation until such a time as they have traded for 12 months. Currently, start-up businesses may receive a 56B Authorisation on an interim basis if they can establish that they will meet the 75% turnover test in their first year of trading.

The additional conditions provide greater scope for Irish Revenue to refuse applications made and are certainly a tightening of the rules in relation to 56B Authorisations.

In addition to the above, the draft legislation grants greater powers to Irish Revenue to cancel authorisations which have already issued and to inform that businesses suppliers directly of the cancellation as well as the ability to publish a notice in Iris Oifigiúil.

Next Steps

The Bill is currently before the Dáil and subsequently will be put before the Seanad for debate but it is expected that the Bill will be ready for commencement by 29 March 2019.

As the outcome of the UK’s withdrawal still remains uncertain so too does the introduction of these draft changes to the VAT Act.

In any event, importers and holders of Section 56B Authorisations should assess now whether the proposed draft legislation will impact their business in order to be ready for these changes from 29 March 2019.

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