03.15.23

United Kingdom – Windsor framework agreement

Brexit, which was implemented in 2020 and which ultimately sparked the UK’s departure from the European Union, presented multiple challenges from a fiscal perspective. One of the most significant challenges was the formation of what is commonly referred to as the Northern Ireland protocol.   

The Northern Ireland protocol provided that EU VAT rules on VAT will apply to Northern Ireland– which was always a contentious issue as by some this was viewed as creating a ‘hard border’ between Northern Ireland and the rest of the UK, which were subject to UK-specific rates. For Tungsten, this presented planning on multiple fronts, as transactions subject to the protocol required the insertion of an XI prefix, as opposed to the GB prefix previously used.   

The proposed Windsor Framework agreement modifies rules for movement of goods between Great Britain and Northern Ireland. A so-called ‘green lane’ is proposed for internal trade, which results in customs checks and surplus checks effectively abolished between the two.  

In other important changes:  

• The UK and Northern Ireland will share the same VAT rates  
• VAT rates can now be applied UK-wide  
• Goods between Northern Ireland and Republic of Ireland subject would be subject to a ‘red lane’, which effectively means that customs checks and additional checks between the two are maintained.   

The introduction of the Northern Ireland Protocol triggered multiple changes in the Tungsten system. Therefore, the reversal of these policies also means it is likely changes will need to be initiated in the Tungsten framework.   

It is important to note that the Windsor Framework Agreement provisions need to be agreed unanimously by the European Parliament, and we will closely monitor the approval of these changes and any changes we need to instil to remain compliant with the agreement.