Policy paper

The Excise Duties and Value Added Tax (Northern Ireland) (Miscellaneous Modifications and Amendments) Regulations 2023

Published 1 February 2023

Who is likely to be affected

Businesses, and in certain circumstances individuals operating in a commercial capacity, moving excise goods (alcohol, tobacco and energy products) between the European Union (EU) and Northern Ireland (NI).

General description of the measure

This measure will make amendments to the rules that apply in NI for the holding and movement of excise goods. The amendments implement changes made in EU excise legislation to ensure domestic excise legislation applying in NI stays aligned with the EU, as required under the NI Protocol to the Withdrawal Agreement. The changes reform some administrative requirements for the movement of excise goods between NI and the EU.

This measure also introduces an exemption from excise duty and VAT for visiting forces of an EU Member State engaged in Common Security and Defence Policy. For the avoidance of doubt, these provisions are not relevant in Northern Ireland.

Policy objective

The objective of this measure is to align domestic excise and VAT legislation that applies in NI with EU excise legislation, following changes to the EU’s administrative requirements for the movement of excise goods, as required under the NI Protocol. The changes will modernise the rules governing these movements and make them more robust against excise duty fraud. The UK was supportive of these changes when it was a Member State.

Background to the measure

Under the NI Protocol, EU legislation continues to apply in relation to the movements of excise goods into and out of NI. Changes to the EU rules relating to excise goods are also required to apply in relation to NI. This helps to protect frictionless trade on the island of Ireland and supports business.

In July 2020, the EU agreed certain reforms to the administrative requirements for the movement of excise goods, based on proposals made by the European Commission in 2018. The reforms were considered and cleared by the UK Parliamentary scrutiny committees in September 2020.

The changes have been made via five new pieces of EU legislation: Council Directive (EU) 2020/262 laying down the general arrangements for excise duty; Regulation (EU) 2020/261 on administrative cooperation in the field of excise duties as regards the content of electronic registers; Decision (EU) 2020/263 on computerising the movement and surveillance of excise goods; Delegated Regulation (EU) 2022/1636 establishing the structure and content of the documents exchanged in the context of movement of excise goods and establishing a threshold for the losses due to the nature of the goods; and Implementing Regulation (EU) 2022/1637 laying down the rules for the use of documents in the context of movement of excise goods under a duty suspension arrangement or after their release for consumption and establishing the form to be used for the exemption certificate.

The objective of the reforms is to modernise processes and procedures and make them more robust against excise duty fraud.

Detailed proposal

Operative date

The changes to NI excise legislation will come into force on 13 February 2023.

As the required IT changes cannot be implemented in full on that date, the legislation also provides for transitional arrangements which will ensure the movements of excise goods between NI and the EU can continue to flow with minimum, or no disruption.

For movements of duty paid goods that started before 13 February 2023, the legislation provides for separate transitional arrangements to maintain existing processes and procedures relating to these movements, so they continue to apply until 31 December 2023.

Current law

The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (HMDP) set out the general arrangements for the holding and movement of excise goods for the UK.

To implement the NI Protocol, HMDP as it stood immediately before the end of the transition period was saved and applied in relation to NI (NI HMDP) by the Excise Duties (Northern Ireland Miscellaneous Modifications and Amendments) (EU Exit) Regulations 2020 (NIMMA). NI HMDP is subject to the modifications set out in Part 1 of NIMMA.

The current EU rules and regulations about the holding and movement of excise goods within the EU are set out in Council Directive 2008/118/EC (the 2008 Directive) and related directly applicable EU legislation. The Directive is implemented in NI via NI HMDP.

Council Directive (EU) 2020/262 (the 2020 Directive) amends and replaces the 2008 Directive, setting out the general arrangements for goods subject to excise duty. The 2020 Directive requires the measures stated in it to be applied from 13 February 2023.

This measure will implement the requirements of the NI Protocol ensuring that the 2020 Directive applies in NI and that domestic excise legislation, that applies in NI, stays aligned with EU excise legislation.

Proposed revisions

NIMMA will be amended to include further modification of NI HMDP to cover the changes to the requirements for holding and moving excise goods in respect of NI.

This includes extending the Excise Movement and Control System (EMCS) to intra-EU movements of excise duty paid goods, so duty paid movements will be made electronically on EMCS.

Two new categories of excise traders, ‘certified consignees’ and ‘certified consignors’, will be introduced. These excise traders will be approved to move duty paid excise goods between NI and the EU for commercial purposes. The Duty Stamps Regulations 2006 will be amended to reflect the new trader types.

The measure also introduces a new ‘common partial loss threshold’ for tobacco products set at 0%. This is the amount of loss that, due to the nature of the goods, can occur during a movement of the goods under duty suspension. There is currently no partial loss threshold, so the introduction of this 0% threshold does not particularly change the current position and duty will still be payable on all losses, however its introduction enables the EU to introduce a non-zero threshold in future.

Amendments to the requirements for exemption certificates are also made. This covers changes to the format of the exemption certificate accompanying excise products that qualify for an exemption, to be set out in a future implementing act by the EU Commission.

This instrument updates the definitions, terminology and cross references to EU Regulations used in NI’s domestic excise legislation in place since the previous Directive was introduced. For example, ‘customs suspensive procedure or arrangement’ will be replaced with ‘excise goods that have the customs status of non-union goods.’

NIMMA will also be amended to include modification of The Excise Goods (Drawback) Regulations 1995 to:

• update an ‘eligible claimant’ to include private individuals who are temporarily certified consignors under NI HMDP;
• introduce a new regulation providing that HMRC may, by Notice, request evidence of duty payment by a clamant, and;
• make clear that a drawback claim will not be paid unless HMRC are satisfied with evidence provided, or of a reasonable explanation as to why evidence cannot be provided.
• Article 18 of the Customs and Excise (Personal Reliefs for Special Visitors) Order 1992 is also amended to extend the excise exemption provided for by Part 7 of that Order to visiting forces of an EU Member State engaged in Common Security and Defence Policy (CSDP) activities. This amendment also provides for a corresponding exemption from VAT in relation to CSDP personnel.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
nil	nil	nil	nil	nil	nil

This measure is not expected to have an exchequer impact.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

Part of this proposal will impact individuals who occasionally move duty paid excise goods for a commercial purpose between NI and the EU.

Customer experience is expected to remain broadly the same as this measure does not alter how private individuals interact with HMRC.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on groups sharing protected characteristics.

Impact on business including civil society organisations

This legislation makes technical fixes to the statute book to implement the requirements of EU Directive 2020/262 into NI domestic law.

The measure is expected overall to improve businesses’ experience of dealing with HMRC as it will digitise certain processes that are currently paper-based and provide a more real-time view of the movement of excise goods.

The proposal is expected to have a negligible impact on an estimated 200 businesses moving excise goods between the EU and Northern Ireland. One-off costs will include familiarisation with the new requirements and could also include updating software. For businesses not currently using EMCS, one-off costs could include purchasing new software and training of staff. Continuing savings could include a reduced administrative burden as a result of the changes.

This proposal is not expected to impact civil society organisations.

Operational impact (£m) (HMRC or other)

There are additional costs for HMRC in implementing this change, for example, to update EMCS so that it can process and supervise duty paid movements in respect to NI. These costs are estimated at around £25 million.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be kept under review through communication and ongoing stakeholder engagement with trade bodies and other representative businesses.

Further advice

If you have any questions about this change, please contact Cesar Yanchev on email: lachezar.yanchev@hmrc.gov.uk.

Declaration

James Cartlidge MP, Exchequer Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.