The NIP has created numerous difficulties during the two years that it has been operating – not least for the flow of trade between Great Britain (GB) and Northern Ireland (NI). 

The Windsor Framework seeks to address the many issues by:

• restoring the smooth flow of trade within the UK internal market;
• safeguarding NI’s place in the Union (by applying UK rather than EU rules); and
• addressing the democratic deficit by introducing a new Stormont Brake. 

Turning first to the smooth flow of trade, the framework creates a new green lane for the internal trade of goods where those goods are not at risk of entering the EU.

Green and red lanes at the border

There will be no physical lanes at the border. The goods not “at risk” will be filtered digitally using a smaller data set to move goods from GB to NI than is currently required. This data filtering will also be based on the information available in existing documentation such as invoices and packing lists. A description of the goods could be used instead of commodity codes. 

This should avoid the need for traders to wade through the UK or EU tariffs to find out what VAT and duty may or may not be due for goods movements within the UK.

The data elements for green lane movements will be reduced from more than 80 to about 21. Classification, where used, will be based on the six or eight digits of the combined nomenclature (CN) code only, depending on the goods.

Goods can be moved without any CN code classification by using a description of the goods. This is on the proviso that HMRC can automatically identify the description and link it to a CN code if required for monitoring purposes.

Goods can be placed on the NI market based on the super-reduced data set with no need for a supplementary declaration or on the basis of a data set based on the trusted trader internal records (ie, entry in declarant’s records [EIDR]).

This change is a high priority for HMRC to implement. It is hoped to be in place by September 2023.

Goods not at risk

These are goods brought into NI from GB by direct transport where:

• the duty payable according to the union common customs tariff (UCCT) is equal to zero; 
• the importer is authorised in accordance with the proposed trusted trader scheme; 
• it is sent in a parcel, and it is of a non-commercial nature and is sent by a private individual to another private individual residing in NI; or 
• it is sent in a parcel by an economic operator through an authorised carrier to a private individual residing in NI and is exclusively for private use.

Goods also fall into this category if: 

• they are brought into NI by direct transport other than from the EU or GB and the duty payable according to the UCCT is equal to or less than the duty payable according to the UK Tariff; or 
• the importer is a trusted trader and the difference between the duty payable under the UCCT and the UK tariff is lower than 3% of the customs value of the good(s).

Parcels are defined as a package containing:

• goods other than an item of correspondence with a total gross weight not exceeding 31.5kg; or
• a single item, other than an item of correspondence, with a total gross weight not exceeding 100kg in relation to a commercial transaction.

Parcel operators will be subject to a similar authorisation as traders moving goods from GB to NI. The infrastructure for compliance with these rules will not be available until September 2024.

Trusted trader scheme

One of the key elements of the Windsor Framework is the expansion of the trusted trader scheme.

Authorisation will be for goods brought into NI by direct transport for the “sale to, or final use by” end consumers. 

The application for the authorisation will include information on the applicant’s business activities, on the goods typically brought into NI and a description of the record-keeping systems and controls to ensure that the authorisation is complied with. Evidence such as invoices must be kept for five years and produced if requested by the EU or UK authorities.

At the very least, the application for authorisation as a trusted trader must contain the following:

• the name of the person to whom the authorisation has been granted;
• a single reference number attributed by HMRC to the decision to authorise;
• the authority granting the authorisation;
• the effective date of the authorisation.

The applicant must meet various conditions for authorisation. These include: 

• satisfying the establishment criteria (the criteria differ depending on whether the applicant is established in NI or GB);

• undertaking to bring goods into NI solely for sale to, or by final use by, end consumers in the UK, and sale to consumers must be undertaken from one or several physical outlets in NI from which physical direct sales are made to end consumers;
• undertaking that they will declare the goods for release into free circulation in NI;
• not having committed any serious infringements of customs legislation and taxation rules in the three years prior to applying or have any criminal record relating to their business;
• demonstrating controls over their operations and of the flow of goods;
• being of good financial standing for the three years prior to applying, or if established less than three years such standing as appropriate for the type of business; and
• demonstrating a clear understanding of its obligations under the authorisation.

Again, this system is a priority for HMRC and should be in place by September 2023.

Existing trusted trader authorisations will be automatically entered in the new system, so there will be no need to re-apply.

Improved access to GB products and human medicines

One of the major issues with the NIP was the fact that certain foods and medicines could not be sent to NI. The new framework means that retail goods in the following categories will once again be moved from GB to NI subject to certain certification criteria. 

Foods

Food products in certain groups will be labelled “Not for EU use”. They can be imported under a general certificate issued by the UK if they originate from the EU or UK, are dispatched from GB and are presented for checks in NI when they arrive. This can also apply to commodities from the rest of the world that are not subject to health rules in the EU. 

Over a period of time, physical checks will be reduced to about 5% of consignments and done on a risk basis with the use of technology.

The foodstuffs affected are:

• products of animal origin (POAO);
• plants other than those intended for planting;
• composite products;
• food contact materials;
• ready-to-sell pet food and chews; and 
• other foods not already listed.

Medicines

UK authorised medicines for human use can be imported into NI by holders of a wholesale distribution licence. Safety features of the medicine cannot appear on the outer packaging. The medicinal products must have an individual label attached to the packaging in a conspicuous place and must state ‘UK only’. These medicines cannot be removed from NI and placed on the EU market.

Pets

The NIP was also affecting the movement of people with their pets.

The framework removes the requirement for a rabies vaccination and treatment for a tapeworm called Echinococcus multilocularis, on the basis that the UK has not had a known rabies case since 1924 and has not detected the presence of the tapeworm to date. The UK undertakes to carry out monitoring of both conditions and to notify the EU of any incidences.

Pets must be microchipped and have a simple travel document checked by the UK. A statement from the owner that the pet will remain in the UK and not travel to the EU is also required. The UK undertakes to minimise the possibility of pets moving to the EU via NI.

Tariff quotas

Under the framework, NI companies will be able to access the EU’s tariff rate quotas for the import of steel from GB, avoiding the 25% tariff linked to the EU safeguard measures.

State aid

The framework provides clarification as to when EU state aid measures apply to NI. EU State aid rules are only applicable to subsidies that have a genuine and direct link to NI. The mere placement of goods on the NI market is not sufficient, on its own, to create a genuine and direct link.

VAT

The framework allows for all changes to VAT rates to apply across the UK. Initially, the scope of this is restricted to goods installed in immovable property. For example, the introduction of a zero rate for the installation of certain energy-saving materials was previously not able to be applied in NI.

Excise

The UK can set its excise rates in NI based on alcoholic strength and set reduced rates for beverages for immediate consumption in hospitality venues.

For both excise and VAT, there is a mechanism to discuss issues in future.

EU laws with direct effect

The UK does not have to apply in NI the EU VAT scheme for small enterprises proposed from 1 January 2025. However, the UK’s own exemption scheme (the VAT threshold) must respect the proposed EU exemption to ensure that larger NI businesses do not benefit from the exemption.

Stormont Brake

To address the democratic deficit, the power to override EU rules will rest with the Stormont Assembly. At least 30 members of the Stormont Assembly from at least two parties must vote for the brake (excluding the speaker and deputy speaker). The UK would then notify the EU of the use of the brake. 

While this power is within the framework, it is envisaged that it would be a last resort, with issues consulted on and discussed at length before operating the brake.

Unanswered questions

There appears to be no mechanism for declaring goods where it is not known whether they will remain in NI or be moved to the EU at a later date. HMRC has said that it is one of the things being considered before issuing the guidance on the virtual lanes.

While the trusted trader scheme is predicated on “solely for sale to, or final use by, end consumers”, there are areas where the end consumer may not be clear. For example, veterinary prescription animal diets are often held by an authorised distributor and then sold to a veterinary surgeon, either for onward sale to an animal owner or as part of a consultation/treatment. Some of these prescription diets are subject to duty (usually due to the starch content). In these cases, is the veterinary surgeon the end consumer or the pet owner? Which person in the chain should register as the trusted trader (GB supplier, distributor, or veterinary surgeon)?

Ruth Corkin, Principal Indirect Tax, Hillier Hopkins LLP, and member of the Tax Faculty’s VAT and Duties Committee