18 October 2019

The Democratic Unionist Party (‘DUP’) has stated that “as things stand, we could not support what is being suggested on customs and consent issues and there is a lack of clarity on VAT”. The support of the DUP is considered crucial if the UK is to leave the EU with a deal on 31st October.

Shortly after this announcement by the DUP, it was revealed that a new Brexit deal had been agreed between the UK and EU negotiating teams. This deal still requires the approval of both the UK and EU parliaments.

The new Brexit deal

If the UK leaves the EU with a deal, the rights of EU citizens living in the UK and UK citizens living in the EU will be guaranteed. EU rules will continue to apply to the UK until the end of 2020 in order to allow businesses to adjust.

Customs

The Prime Minister has advised that the controversial backstop, which may have kept the UK in a customs union with the EU indefinitely, has now been abandoned. In order to prevent a hard border between Northern Ireland and the Republic of Ireland, there is to be a ‘legal customs border’ with goods to be checked at Northern Irish ports and airports.

Northern Ireland will form part of the UK’s customs territory and any trade deal entered into by the UK government and the EU will apply to Northern Ireland.

It has reportedly been agreed that tariffs will not require to be paid on goods entering Northern Ireland from Great Britain however, where the goods are “at risk” of being transported to the Republic of Ireland, duty will be payable as it will remain part of the EU customs union. A joint EU and UK committee will decide which goods are to be considered “at risk” of entering the single market and the UK will collect the EU tariffs on behalf of the EU.

VAT

The new agreement sets out that EU law on VAT (value added tax) will apply in Northern Ireland in relation to goods. Northern Ireland will be permitted to have different VAT rates to the rest of the UK, this is not currently permitted under EU law.

The impact of this means that Northern Ireland may receive the same VAT rates on goods as the republic of Ireland, this would avoid an unfair advantage on either side of the Irish border.

This deal also gives the Northern Irish Assembly the opportunity to vote on these provisions after 4 years. If the Assembly votes against these provisions then they would no longer apply two year later and a “joint committee” would make alternative recommendations to the UK and EU. If, however, the Assembly votes in favour of the continuing provisions by a simple majority they will continue to apply for a further four years. If there is cross-community support then the provisions will apply for a further eight years or until such time as a new agreement is reached, if earlier.

Following today’s agreement between the UK and EU negotiating teams, European Commission President Jean-Claude Juncker has said that the new deal is “fair and balanced” and has now ruled out future Brexit delays.

Parliament is scheduled to vote on this new Brexit deal on Saturday, 19th October.

Contact: Scott Wyper, Partner T: 0141 221 8012 E: swy@bto.co.uk