The VAT system in Northern Ireland is policed by HM Revenue & Customs (HMRC) with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules.
Scope of VAT
A transaction is within the scope of VAT if
- there is a supply of goods or services
- made in the UK
- by a taxable person
- in the course or furtherance of business.
Inputs and outputs
Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them.
However the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Certain categories of input tax can never be reclaimed, such as that in respect of business entertainment and for most business cars.
You are required to register for VAT if the value of your taxable supplies exceeds a set annual figure. New limits are announced in the Budget each year.
If you are making supplies below the limit you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT if your business was principally making zero rated supplies.
If you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start up expenses can be recovered.
It is however important for you to seek specific professional advice appropriate to your circumstances.
Value Added Tax (VAT) is a tax on consumer spending. It is included in the price of most goods and services and is an important source of funding for the Irish Government each year.
There are a number of different rates of VAT
- Most goods and services are charged at the highest rate
- A reduced rate is applied to certain labour intensive services
- A zero rate is applied to many foods and medicines and to children’s clothes
- Separate rates are also applicable for the sale of livestock and agricultural supplies
- A number of services supplied in the public interest are exempt from VAT, e.g. health, childcare and education
Please note that VAT rates are subject to change.
For exact VAT rates please visit the VAT Rates section of the Revenue Commissioners website.
The document used by traders to account for VAT is called a VAT Return (Form VAT 3). This must be filled out by a trader at the end of each taxable period. A taxable period is normally two months long, and is counted from the start of the year – January/February is the first one each year. The VAT return will contain figures reflecting the transactions carried on by the trader, including the amount of VAT charged by him or her, and the amount of VAT that he or she wishes to reclaim. Any imbalance between these two figures will indicate either a payment of tax due from the trader to Revenue, or a repayment due from Revenue to the trader. In certain circumstances, a trader may be permitted to make returns at different frequencies.
Individuals with disabilities may be entitled to claim back VAT paid on certain aids and appliances they need as a result of their disability e.g. Braille books. Please visit the VAT Rates section of the Revenue Commissioners website for further detail
Purchases within / outside the European Union
Please note that Ireland and Northern Ireland have different VAT rates!
The Citizens Information contains useful information on:
- VAT on imports – online shopping or mail order
- Travelling with your purchases
It is important to be aware of the limits that apply before VAT, Customs Duty and Import Tax are incurred.
For further information please visit Citizens Information – Value Added Tax
Shopping abroad – Pay VAT in the country where you shop
Source European Union – Your Europe website – Shopping section
As a private individual shopping in the EU, you should only pay VAT once, in the country where you make your purchase.
You can bring home anything you buy in another EU country, without stopping at the border or making a customs declaration. The only condition is that your purchases must be for your own or your family’s personal use, and not intended for resale.
Exception for cars
For new cars bought in another EU country, VAT is paid in the country where you register your car, that is, in your country of residence.
A new car means one which has travelled less than 6000 km, or is less than six months old. This VAT scheme also applies to other new means of transport, such as boats and aircraft.
For used cars and other second-hand vehicles bought from a private person, the VAT will already have been paid by the original buyer in the country of purchase. You should therefore not pay VAT for a used car bought from a private person, either in the country where you buy it, or the country where you register it.
For further information about your rights when you buy a car in another EU country please visit – Your Europe – Buying a car abroad
Q) Do I need to register my cross border business for VAT?
- NI Business Working in ROI – page 52
- ROI Business Working in NI – page 53
- HM Revenue & Customs – VAT home page
- Border People – Cross border business
- Border People – Cross border business guide for companies
- Border People – Distance selling
- FPM Chartered Accountants –VAT
- John McMahon Chartered Accountants – www.johnmacmahon.com
Page last checked: September 2017
This webpage is for general information purposes only and while we endeavour to keep it up-to-date, errors may occur. It is very important that you check with the relevant body to ensure the information is current and is applicable to your situation.
If you would like to suggest amendments or highlight new information that could be useful to others please don’t hesitate to get in touch.