Will the Northern Ireland protocol benefit business?

Scrutinising the Windsor Framework.

Legislation for the Windsor Framework – the Northern Ireland Brexit agreement between Britain and the EU which rewrites the Northern Ireland Protocol – is making its way through Parliament.

It was first made between PM Rishi Sunak and EU Commission president Ursula Von Leyen at the end of February.

The Northern Ireland Protocol initially aimed to avoid a hard border between the Republic of Ireland (which remains in the EU) and Northern Ireland (which is UK territory) by ensuring Northern Ireland remains subject to EU custom rules. But a section in the Windsor Framework known as the Stormont Brake, now gives Northern Ireland more powers to block or challenge any new or future EU rules, if absolutely necessary. 

In essence, the Windsor Framework comprises three elements:

• Movement of goods from Great Britain to Northern Ireland
• Northern Ireland’s VAT status
• Governance of the amendment Northern Ireland Protocol.

The new arrangements involve:

• Green lanes: for goods destined for Northern Ireland. These will not be subject to checks and requirements.
• Red lanes: for goods ‘at risk’ of moving into the Republic of Ireland and the rest of the EU. These will be subject to standard third-country checks.
• Parcel simplification: to remove custom requirement bureaucracy on some parcels.
• VAT: introducing more flexibility on future VAT rates in Northern Ireland under certain conditions and exempting Northern Ireland-based businesses from many EU rules.

So what does all this mean for businesses?

The framework will make NI more attractive to overseas investors

Ashley Ritchie, Director, Campbell Ritchie Chartered Accountants (based in Northern Ireland)

The majority of my clients are in Northern Ireland with some in mainland UK and south of Ireland, so I’ve had to learn a lot new rules after Brexit.

The Windsor Framework will simplify Northern Ireland’s VAT system, allow for some exemptions and establish new categories for goods consumed within the region. It will also remove more than 60 EU rules which govern food and drink coming into Northern Ireland. For example, M&S didn’t sell Christmas puddings this year because of the Northern Ireland Protocol and if I order Hello Fresh, I can only select chicken or meat-free products.

Under the framework, food destined only for Northern Ireland must be labelled ‘not for EU’. This labelling will start in October for prepacked meat and milk.

Parcels being delivered into the country will also have a simplified process which is welcome news. If parcels are below a certain limit, they won’t have any customs formalities.

Overall, the new scheme will benefit many industries in Northern Ireland – food, gardening/plants, medicines and haulage just to name a few. Plus the use of green and red lanes for imports is an improvement to the current system. It gives Northern Ireland the best of both worlds and is a great selling point to attract investors from other countries like the USA.

Verdict: The framework will be of great benefit to Northern Ireland’s businesses, remove over 60 EU rules and help attract investors to the region.

Businesses will see reduced red tape and costs as a much better deal

Richard Phillips, VAT Manager, PKF Francis Clark

The Windsor Framework reflects a significant reduction in the volume of ‘red tape’ and regulatory costs following Brexit. Businesses in Northern Ireland and the rest of the UK will see this as a much better deal.

The EU has shown a very conciliatory attitude to help bring Northern Irish business back under the UK umbrella. But it is a concern that the DUP, despite the concept of the Stormont Brake, is not able to agree with the framework in total.  

Declarations will still be required, but far less data will be demanded. A new online portal is proposed where businesses or agents can input standard information from commercial invoices and freight contracts.

The big gain is that goods destined for companies supplying Northern Irish consumers may enter via a green lane without Border Force checks, provided the supplier or purchaser has the required scheme registrations. This green lane system is to be known as the ‘UK Internal Market Scheme’.

In addition, the agreement to cease EU regulation on Sanitary and Phyto Sanitary products and to lift the ban on GB chilled meat products destined for Northern Ireland markets are welcome news. Supermarkets, wholesalers, nurseries and hospitality trades, which have suffered since Brexit, will all benefit.

GB suppliers and Northern Ireland purchasers should be reviewing their supply chain structures to ensure they have necessary registrations. Those already registered with the UK Trader Scheme (UKTS) will be automatically moved over to the new UK Internal Market Scheme.

Verdict: Reduced red tape and fewer data demands will alleviate pressure on businesses.

The framework will reduce administrative burden and VAT rates on certain products

Gerry Myton, Partner, Head of Indirect Tax, HW Fisher

As part of the Windsor Framework deal, the EU has agreed to cease legal action against the UK whilst the UK will drop parts of the Northern Ireland Protocol Bill. Meanwhile, a Stormont Brake gives Northern Ireland a mechanism to stop the application of amendments to or the replacement of EU law as applied to Northern Ireland.

There are three noteworthy changes relating to VAT:

• The UK can apply reduced VAT rates on goods supplied and installed on immovable property located in Northern Ireland
• The UK does not need to apply the special EU VAT scheme for small enterprises in NI from 1 January 2025
• The EU and the UK will work to establish a list of goods not at risk of entering the EU and therefore, not subject to EU VAT rules.

Businesses and customers will benefit from these changes. Businesses now have one set of rules which will reduce the administrative burden, while customers will benefit from reduced VAT rates on certain products that will now apply across the entire UK.

Under the Green Lane scheme, more businesses will be able to register as ‘trusted traders’ and goods will move into Northern Ireland without the onerous customs checks and provision of paperwork that previously existed. Checks in the green lane will involve risk-based tracking methods that will allow the EU real-time access to UK customs systems.

Verdict: The framework will reduce the administrative burden and VAT rates on certain products.

The green and red lane system will speed up transportation of goods

Paul Samrah, Partner and Brexit specialist, Moore Kingston Smith

The Windsor Framework represents a vast improvement for businesses compared to the current arrangements. It is simpler, clearer and requires much less paperwork.

The deal promises frictionless crossing of sea, which will no doubt ensure a smoother operation all round for businesses. Representing a welcome reduction of red tape, businesses using the new green lane will find it no different sending goods from London to Londonderry than they do from Liverpool to Leith.

For the transportation of goods from Lands’ End to Limerick, the red lane must be chosen – but there will be far less traffic in that lane due to the provision of a streamlined green lane for goods that won’t be going on to Ireland. It’s a straightforward and practical solution that the owner-managed businesses we work with welcome.

Businesses must make sure they have the right paperwork in place – they will need to register as a trusted trader under the new UK IMS Internal market scheme. And of course, they must choose the correct lane.

A review of the deal will take place in 2026, and at five-year intervals following entry into the agreement. At this juncture, both parties will consider what works and what doesn’t, and have the opportunity to update the deal by mutual agreement.

Verdict: The deal will speed up transportation of goods thanks to green and red lane system.

Registering as a trusted trader for green lane eligibility will still require a lot of paperwork

Rob Janering, VAT Partner, Crowe

On the face of it, the Windsor Framework seems like a good deal and should make things easier for many businesses. However, there’s still likely to be a lot of paperwork involved, even for businesses whose goods meet the green lane criteria (where goods are only going as far as Northern Ireland) – they will need to register as trusted traders.

It’s not entirely clear what this will involve. Inevitably, there will need to be regular checks on trusted traders to ensure supply chains and internal controls continue to meet the criteria.

For goods that are going to the Republic of Ireland and/or the rest of the EU documentation and paperwork required will be the same as before. And businesses whose goods might otherwise meet green lane criteria but aren’t yet trusted traders will need to use red lanes and submit required paperwork. 

My main concern is that the Windsor Framework will be more beneficial to big businesses which will have the time, money and resources in comparison to smaller SMEs, which may struggle. 

But the details of how all this will work in practice is still under consultation.

Although the framework will not come in until at least 2024, businesses should be preparing now: reviewing supply chains, ensuring they can identify exactly where their goods are going and improving and reviewing their governance practices, internal controls and due diligence.

Verdict: Registering as a trusted trader for green lane eligibility will still require a lot of documentation and paperwork, which is not idea for SMEs.

Annie Makoff is a freelance journalist and editor.