Introduction

The Northern Ireland Tax Committee of Chartered Accountants Ireland is pleased to have the opportunity to comment on the above consultation launched on 6 February 2020. Information about Chartered Accountants Ireland and the Northern Ireland Tax Committee is provided on the previous page.

We wish to briefly comment on the current consultation and would be happy to discuss any aspect of our comments herein and to take part in any further consultations/initiatives in this area.

Northern Ireland

As noted in the consultation, The Northern Ireland/Ireland Protocol in the Withdrawal Agreement provides for certain specific arrangements as regards Northern Ireland. Although this matter therefore sits outside the current consultation, we call for a full and rigorous process of consultation to be undertaken with the business community in order to develop detailed guidance on the specifics of this Protocol. This needs to be conducted as a matter of urgency and should address the format and administration of specific border checks in the area of customs and regulation to allow businesses sufficient time to prepare for the post-transition period.

Article 15 of the Protocol referred to the establishment of a joint consultative working group as a forum for the exchange of information and mutual consultation due to meet at least once a month. Now that trade talks have commenced between the UK and the EU, meetings of this forum should start as a matter of urgency and a workplan should be produced as soon as possible to engage with the business community on this important matter.

Global tariff system

The UK should initially introduce a Global Tariff system, which mirrors the current EU External Tariffs system. This should be in place for a period of at least two years after the end of the Brexit transition period. This will already be familiar to many businesses that currently import from outside the EU.

Should the UK then wish to design a bespoke UK Global Tariff, the two-year window can be used to carry out a deep dive and engage specifically with different sectors of the UK economy to arrive at a Global Tariff System that will allow the UK economy to compete on a global basis.

This would also enable a more thorough review of the economic and trading impact of leaving the EU on each specific sector after a period of bedding down, after the proposed end of the transition period on 31 December 2020.

It would also allow for a thorough examination of the interaction of any proposed Global Tariffs with the Most Favoured Nation tariffs of other countries and the importance of tariffs to specific sectors.

“Nuisance” tariffs and tariff banding

We are supportive of the proposal to remove nuisance tariffs of 2.5% or less but think the de-minimis limit for nuisance tariffs should be higher, perhaps 5%.

The consultation also proposes to introduce standardised banding of tariffs. New Zealand has been cited as a territory that has implemented both a banded approach and removed “nuisance tariffs”. The UK government should consider discussing the impact that tariff banding and removal of nuisance tariffs has had with the New Zealand government.

Agricultural tariffs

We agree that the Government should both consider rounding tariffs down to the nearest standardised band and introducing single percentage-based tariffs for agriculture. Both of these would be straightforward and easier for businesses to understand.

However, under both methods it could be difficult to arrive at an appropriate tariff for different sub-categories and could result in undesirable higher tariffs on some products with “luxury” products able to avail of lower-than-expected tariffs, making more basic products potentially more expensive and less able to compete.

Removal of tariffs in respect of zero/limited production

The proposal to remove tariffs on goods where there is zero or limited domestic production is positive. This would appear similar to the EU’s proposal to suspend tariffs due to take effect from 1 January 2021, which also applies to goods with zero or limited domestic production. Implementing this on the UK side would aid competition and level the playing field for buyers.

It is suggested that the list of UK tariff suspensions at the very least mirrors that of the EU, but also has an application process similar to that in place in the EU. See https://dbei.gov.ie/en/News-And-Events/Department-News/2020/January/01012020.html for details of the Irish application scheme currently in place.

This will be particularly important in Northern Ireland to ensure a level playing field with Republic of Ireland manufacturers, as they will already have an advantage in respect of trade with Northern Ireland as no tariffs are currently proposed under the Protocol on imports from the Republic of Ireland to Northern Ireland.

VAT-postponed method of accounting

The UK should consider implementing the VAT-postponed method of accounting on imports as a cash flow easement. This should be applied UK-wide. The introduction of such a measure would substantially ease the cash flow burden on UK businesses and facilitate freer trade.

Under the postponed method of accounting, importers would defer payment of the VAT that would arise at the point of import and instead declare it on their next VAT return, where they would take a simultaneous deduction, thus neutralising the VAT cash flow effect.

From the exchequer perspective, only one VAT period would be affected by a change in method and the position would neutralise over the year. Therefore, the exchequer is not disadvantaged by changing the VAT method.

Source: Chartered Accountants Ireland Northern Ireland Tax Committee.