In common with other European Union member states, and the EU itself, the Irish Government is now making preparations for the possibility that the United Kingdom will withdraw from the EU on 29 March 2019, without having agreed to any formal exit arrangements.
Brexit Omnibus Bill
In what the Irish Government described as a "landmark" move, on 22 February 2019, "The Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019" was published.
The legislation is comprehensive, covering nine ministries' competencies, with measures intended to support the economy, enterprises, and jobs. The bill includes numerous sections on taxation, covering individual income tax, corporation tax, capital gains tax, value-added tax, stamp duties, and capital acquisitions tax.
The bill is also designed to be consistent with, and complementary to, the steps currently underway at EU level to prepare for the UK's withdrawal, notably as regards the implementation of the European Commission's Contingency Action Plan and the associated legislative measures.
What Does A No-Deal Brexit Mean?
A no-deal Brexit means that the UK would no longer be part of the framework of EU law, becoming a "third country," and outside the Single Market and Customs Union immediately.
An EU company will be affected by Brexit if it:
- Sells goods or supplies services to the UK, or
- It buys goods or receives services from the UK, or
- It moves goods through the UK.
In tax terms, the hard Brexit proposed by the Government will have the most serious consequences for VAT-registered businesses who trade regularly with the UK. As the Commission explained, in the event that the UK becomes a third country, member states will charge VAT at importation of goods entering the EU from the UK, although exports to the United Kingdom will be exempt from VAT. Additionally, rules for the declaration and payment of VAT (for supplies of services such as electronic services) and for cross-border VAT refunds will change.
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Postponed VAT Accounting Scheme
To mitigate the impact of a no-deal Brexit on VAT-registered businesses in Ireland, on 6 February 2019, the Irish Government announced proposals to introduce a system of postponed accounting for VAT. This will enable VAT-registered businesses importing goods from the UK to account for import VAT on their VAT return, rather than having to pay import VAT on or soon after the time that the goods arrive at the Irish border.
The measure is intended to alleviate the cash-flow impact on businesses of the UK's departure and the consequent requirement that businesses should pay VAT at the point of import, rather than at the time they file their bimonthly VAT returns.
The Government said that, while the introduction of the scheme will be provided to all traders for a period, continued qualification for postponed accounting will depend on Revenue authorisation from a later date to be agreed.
Following a request by the UK, the European Council has agreed to extend the UK's departure date to 22 May, provided that the EU-UK Withdrawal Agreement is passed by the UK's House of Commons by 29 March the date on which the UK was originally due to leave the EU. If the Withdrawal Agreement is not approved, the departure date would be extended to 19 April, and the UK would be expected to indicate a way forward before this date.
The Commission said that if the Agreement is not ratified by 29 March, a "no-deal" scenario may occur on 12 April. In a "no-deal" scenario, the UK would become a third country without any transitionary arrangements; there would be no transition period as provided for in the Withdrawal Agreement. All EU primary and secondary law would cease to apply to the UK from that moment onwards.
Get Brexit Ready
How prepared are you for Brexit? Is it affecting your decision to open a company in Ireland? Enterprise Ireland have a website on how to "Prepare for Brexit". You can register for the Customs Insight training course, find out more about their Be Prepared Grant and discover their Brexit Advisory clinics.