Brexit Vat Overview: Exports - Irish Businesses Selling Goods Abroad
by Kevin Canning
 
 

Part 2 of our Brexit Series will focus on Irish Businesses selling goods abroad. Brexit has made this far more complicated than in the past and therefore, we aim to provide an overview of the considerations here.

An important point to note in relation to the supply of goods between Ireland and the UK is:  

  • NI is considered part of the EU for an initial period of 4 years
  •  
  • UK is not considered part of the EU. Therefore, all supply of goods between the EU & UK are now considered exports/imports

The following is a summary of the VAT & Customs considerations for Irish Suppliers to selling Goods to Irish, EU, NI or UK customers:

 

 

We will use the example of clothing producer (ABC Clothes) to describe the VAT issues for the supply of goods abroad. In this example, ABC Clothes provides boxes of clothes to shops for sale (B2B – Wholesale) and ABC also sells directly to customers through online channels (B2C)

 

ABC’s products are subject to standard rate of VAT when sold in Ireland.

 

Business to Business (“B2B”) Supply of Goods

 

The following are the Irish VAT consequences for ABC wholesale selling goods to businesses:

  • Irish Business Customer: Irish VAT applicable

 

  • EU Business Customer: The EU customer would provide ABC with its EU VAT number. ABC would quote this number on the Invoice and Zero rate the invoice. The customer is liable to self account for VAT then. This would be considered an intracommunity sale for ABC

 

  • NI Business Customer: As NI is still considered part of the EU for VAT on Goods, the same treatment would as an EU customer. Generally, customs will not be considered as NI are part of the EU. However, customs might apply if you are using NI as a vehicle to transport goods to or from the UK (anti-avoidance measures).

 

  • UK Business Customer: Given the UK is no longer part of the EU for the supply of goods, this would be considered an Export and not be included in ABCs VAT return. ABC can zero rate the sale if ABC obtains proof that the customer is in fact a business. This does not need to be a UK VAT number - proof could be as simple as checking the Company has a website or the Company’s House in the UK (UK version of the CRO). Custom declarations and possible custom duties will apply to these transactions.

Business to Consumer (“B2C”) Supply of Goods

 

The following are the Irish VAT consequences for ABC selling goods directly to end consumers (i.e. via a Shopify Store):

  • Irish Customer: Irish VAT applicable

 

  • EU Customer: Irish VAT applicable unless distance selling breached in the other EU country (generally around €75k but varies from country to country). Please note that there is a major overhaul of the B2C VAT rules within the EU coming on 1 July 2021. We will provide guidance on this shortly.

 

  • NI Customer: As NI are still considered part of the EU for VAT on Goods, the same treatment would as an EU customer. The distance selling threshold for NI is £70k. Customs does not apply as NI are still considered part of the EU.

 

  • UK Customer: Given that the UK are no longer part of the EU for the supply of goods, B2C sales of goods to UK consumers is now very complicated and in some cases, not worthwhile. This has become so complicated, that it should be considered on a case by case basis. I have provided more detailed analyses on this below. Please note custom declarations and possible custom duties will apply to these transactions.

B2C - Exporting to the Mainland UK  

 

It is important to point out that I am not a UK tax advisor. I am providing my understanding of the current situation; this does not constitute tax advice.

 

In the case of ABC, the company would have to register for VAT in the UK. It is important to note that distance sales thresholds no longer apply in the UK and therefore most exporters of goods to end consumers in the UK will have register for VAT in the UK regardless of how much UK sales the exporter has. In many cases, this will make it pointless for smaller exporters to sell in the UK.

 

The UK introduced new VAT Rules from 1 January 2021 (in line with rules expected rules to come into effect in the EU on 1 July 2021). There is now a distinction between shipments worth over £135 and under £135 (€150 equivalent). Our understanding is currently:

  • Shipments under £135: Must charge UK VAT at the point of sale (i.e. on a Shopify store) and Irish company would have to register for and pay UK VAT.

 

  • Shipments over £135: Option to either register for UK VAT and charge VAT at the point of sale or rely on a courier/importer (such as DHL) to charge VAT when the item arrives at the customers house – however, there is a commercial aspect here and no customer wants to pay VAT when a delivery arrives at their house. In any case, you may still have to register for UK VAT here.

Further to the above, there is some good news for smaller exporters to sell in he UK via online marketplaces such as Amazon. The new UK VAT rules force online marketplaces to become the person responsible to charge and remit VAT as opposed to the seller. This would apply for selling goods on Amazon UK, however, it should not apply to Shopify Stores even though all stores are bundled together in the Shop app.

 

There is still quite an amount of confusion around the new VAT rules for Irish businesses selling goods to end consumers in the UK. We will provide further updates when available. However, if this affects you, I advise you start thinking about your UK sales strategy. We would be happy to speak to you on this.

Please note that the above is provided for informational purposes and should not be considered tax advice. if you would like to speak to Quintas about any Brexit issues, please contact either Kevin Canning (Kevin.canning@quintas.ie) or Dave O’Brien (Dave.obrien@quintas.ie)