Post-Brexit Irish Sea Border To Be Harder Than Government Will Admit, Says MHA Macintyre Hudson

Following the release of the latest Cabinet Office policy paper on customs and checks between Great Britain and Northern Ireland following Brexit (Friday 7 August) Glyn Edwards, VAT director at MHA MacIntyre Hudson says the government are still playing down the need for a hard border in the Irish Sea

“The latest government policy paper on the Northern Ireland Protocol continues to play down the need for a hard border in the Irish Sea if Brexit is going to work.

“The government is still not facing up to the challenges surrounding EU goods imported into Northern Ireland that then move from the province to the rest of the UK. The current aim is for no tariffs to be applied between Northern Ireland and the rest of the UK, giving the province unfettered access to Great Britain. However, this means there will be a significant temptation to set up a Northern Ireland base for any UK business facing tariffs on EU imports.

“Unless the UK government narrows the qualifying criteria for unfettered access to Great Britain for Northern Irish companies significantly before 1 January 2021 any sizeable UK business could retain access to tariff free acquisitions from the EU simply by establishing a related company in Northern Ireland to effect the import. This would undermine the government’s intention to treat imports from the EU in exactly the same way as imports from all other countries.

“The Government is still to define a qualifying status for the goods and businesses in Northern Ireland that will benefit from unfettered access to the GB market, but it is difficult to imagine any simple method which will allow free trade within the UK while, at the same time, allowing goods to flow freely between the EU and Northern Ireland.

“In the opposite direction the integrity of the Single Market, which the EU holds as an absolute red line in negotiations, can’t survive unless the UK places satisfactory controls on the movement of goods from Great Britain to Northern Ireland, where those goods might then be sold into the EU.

“This is required because any goods originating in Great Britain have to face barriers on entry to the EU. Unless the UK government increases customs checks or imposes additional customs requirements it may find this an impossible task, particularly for goods which are UK VAT zero-rated as these don’t rely on proof of export to escape 20% VAT, where the temptation to be non-compliant will be greatest.”