Brexit update: EU Council adopts VAT Directive regarding the identification of taxable persons in Northe | Deloitte Nederland

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Brexit update: EU Council adopts VAT Directive regarding the identification of taxable persons in Northern Ireland after the end of the transition period

On 20 November 2020, the Council of the European Union adopted a proposal for the use of the ‘XI-prefix’ on VAT identification numbers for Northern Ireland.

8 December 2020

Background

As from 1 January 2021, the EU VAT legislation will in principle no longer apply to the United Kingdom (hereafter “UK”).

However, Northern Ireland will remain part of the EU VAT system with respect to goods. As Northern Ireland will remain part of the UK VAT regime as well, businesses should be able to distinguish the transactions with the EU subject to the Northern Ireland protocol (i.e. intra-community dispatches and acquisitions between the EU and Northern Ireland) from other transactions with or from the rest of the UK (i.e. Great Britain, that being England, Scotland and Wales).

Against this background, the Council adopted a proposal amending the VAT Directive for the use of a ‘XI-prefix’ on VAT identification numbers for Northern Ireland.

The measure will be effective as from 1 January 2021. This means that VAT identification numbers should be issued by HMRC (the UK tax authorities) for businesses trading under the Northern Ireland protocol, containing the prefix ‘XI’, provided that these businesses are already in the possession of a GB VAT identification number. As there is no specific guidance from an EU perspective in relation to European Sales Listing and/or Intrastat, the assumption is that the ‘XI-VAT identification numbers’ should be reported. For Intrastat purposes, it could be the case that both the XI- and GB-prefix will have to be used until the end of 2021 (also see the recent Brexit update).  

UK tax authorities

However, HMRC recently stated that there is no need to apply for a new VAT number in case a taxable person is already identified for VAT purposes for Northern Ireland. According to recently updated UK guidance, businesses are responsible for identifying whether certain transactions are subject to EU VAT rules. In case such transactions are performed, the current UK VAT number with prefix XI should be communicated with your suppliers or customers (instead of GB). Furthermore, the VAT identification numbers containing the new XI-prefix will be included in the VIES database.

We expect HMRC will provide more clarity on the practical implications in the coming weeks.

What does this mean for you?

We strongly advise to consider whether the Northern Ireland protocol may apply to your business activities and monitor any additional guidance that may be published. If this is the case, it is recommended to analyze the impact of the amendment of the VAT Directive regarding the identification of taxable persons in Northern Ireland on the supply chain and ERP-setup when trading with both Northern Ireland and the ‘rest of the UK’.

We will keep you updated in case of new developments in respect of what is a particularly fluid part of Brexit.

For more information, please send an email to nltaxbrexitteam@deloitte.nl or contact your engagement team.

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