27 February 2023
As Prime Minister Rishi Sunak finalises a new deal with the EU, Alison Horner at MHA says the devil will be in the details.
It may be trite to say the devil will be in the details but it is also true in this case. UK businesses trading with Northern Ireland (NI) have found the new systems very challenging so we all hope Rishi Sunak’s new deal provides a solution.
There are big questions about the ‘green channel’ which is at the heart of the new deal’s solution to the trade issue. The reduction in checks for NI-destined goods will be a great coup for the UK government, but it will be the kind of compliance required to access these simplifications that will determine how much businesses actually benefit.
The UK and EU have long agreed that British goods which are staying in Northern Ireland should be subject to fewer checks and controls than products which are going to be moved across the border into the Republic of Ireland.
They are set to agree that this can be done using the concept of green lanes and red lanes.
British goods which are staying in Northern Ireland would use the green lane at NI ports, meaning they wouldn't have to be checked and would require minimal paperwork.
Goods which are due to travel into Ireland would use the red lane meaning they would face customs processes and other checks at NI ports.
Authorisation for use of the green lane will be a major issue. The need for authorisation will mean that businesses will have to retain satisfactory records for both customs and probably VAT. The question here is whether the UK Trader Scheme (UKTS) will be used, or if a new, more intense, authorisation will be required by the EU to ensure that compliance is managed satisfactorily.
There are other issues too. What happens if there is a load which includes goods which are ‘at risk’ as well as ‘not at risk’ of entering the EU? How will these be declared, and will the lorry still be required to enter the red lane even if there is one package which is ‘at risk’? If so this will negate a lot of the benefits of the new deal.
The deal probably does not change the status quo on VAT. Recent changes to VAT on solar panels which was reduced to 0% for installation in GB could not be extended to NI. The deal is unlikely to see NI diverge from current EU VAT laws and so NI is still unlikely to benefit from GB’s ability to evolve and set its own VAT agenda. However, NI hugely benefits from being part of the EU due to VAT free trade within the EU and this benefit should not be underestimated.