Moving goods between mainland UK and Northern Ireland within a VAT Group

Q: My client is a UK VAT Group registration with members being located in both mainland UK (GB) and Northern Ireland (NI). One of the GB based Group members is to transfer stock to another Group member based in NI. Prior to Brexit this transfer would not have been treated as a transaction for the purposes of VAT and so would not have been declared on the VAT Group’s VAT return. Has Brexit changed this?

A: One of the general rules of VAT Group registration is that a supply between VAT Group members, whether of goods or services, is disregarded for the purposes of VAT and so does not appear on the Group’s VAT return and is not included in any partial exemption calculation the VAT Group may need to undertake.

However, since Brexit, where this is a transfer of goods and those goods move from GB to NI or vice versa or where goods in NI are moved between members, then this general rule has changed, with HMRC’s guidance, providing advice of this change; see link below.

https://www.gov.uk/government/publications/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021

In the client’s case, the goods are moving from GB to NI and so, according to HMRC guidance, the transfer is no longer disregarded for VAT purposes.

Instead, the VAT Group must treat the transfer as a sale with VAT due at the appropriate UK VAT rate and declare this on the Group’s VAT return.

The Group must also treat the transfer as a purchase, again declaring it on the Group’s VAT return, claiming the declared output tax as input tax, subject to any rules blocking the input tax or restricting recovery if the Group is partially exempt or is involved in non-business activities.