VAT in Northern Ireland

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.

Registration

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.

Cross-border issues

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

Cross-border business

Q) Do I need to register my cross border business for VAT?

A) PKF-FPM Chartered Accountants has provided an overview which will help guide you –   Cross Border Tax Issues

  • NI Business Working in ROI – page 52
  • ROI Business Working in NI – page 53

See also:

Page last checked: January 2016

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.