Brendan Griffin (Kerry, Fine Gael)
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293. To ask the Minister for Finance if his attention has been drawn to the heavy impact of Brexit tariffs and VAT requirements on TAN number holders importing used cars from the UK; if he will seek a review of regulations for such dealers in respect of marginal scheme cars; if his attention has been drawn to the shortage of quality used cars available to the Irish market; and if he will make a statement on the matter. [40392/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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In accordance with the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union, from 1 January 2021 onwards, goods imported from Great Britain must be declared to Customs, and the goods are liable to customs duty (if applicable) and VAT at import. The Agreement is clear that this applies to all goods, and it leaves no possibility for a different arrangement such as, for example, reverting to the tax treatment of used cars that had applied during the Transition Period before 1 January. Under the terms of the Protocol on Ireland/Northern Ireland, trade in goods between Ireland and Northern Ireland should continue as before, with no requirement for customs declarations and no liability to customs duty and VAT at import.

Since the UK left the EU Single Market and Customs Union, customs formalities apply to vehicles being imported from Great Britain. While I appreciate the significant impact this has on businesses, Customs is an EU competence and applies in all Member States, and it is not possible for me, as Minister for Finance, to implement any measures or suspend any measures that are not in compliance with EU Customs legislation.

It should be noted however, that the EU-UK Trade and Cooperation Agreement (TCA) eliminated tariff duties for trade between the EU and Great Britain where the relevant rules of origin are met. If the vehicles are of UK origin, then a 0% tariff rate applies. Tariffs of 10% will apply to vehicles which are not of UK origin. However, in certain instances returned goods relief may apply. This relief applies where the vehicles were originally exported from the EU, have not been altered and are re-imported within three years of export from the EU. In very specific circumstances, relief from Value-Added Tax (VAT) may also apply where the goods are re-imported into the EU by the same economic entity that originally exported the goods out of the EU.

Further detailed information on Returned Goods Relief and Movement of Motor Vehicles including proofs required for claiming the relief is available on the Revenue Website.

There is a particular issue with margin scheme cars. The UK has introduced significant changes to the VAT regime for used cars imported from Great Britain into Northern Ireland and extended the scope of the Margin Scheme to them. Under the Margin Scheme, a car dealer simply accounts for VAT on his or her gross profit margin on the sale of a used car, i.e. on the difference in the trade-in and resale prices. The UK had signalled that it would approach the European Commission to seek changes to the rules that apply under the Withdrawal Agreement/Protocol but they moved unilaterally on 14th January 2021 and published new rules that apply retrospectively from 31 December. The UK asked the Commission for a permanent derogation from the VAT Directive to allow them to operate the scheme but the Commission refused on the basis that the margin scheme cannot be applied on sales in Northern Ireland of second-hand cars imported from any 3rd country including Great Britain.

As a result, and after considering the scale of the threat posed by the abusive routing of cars imported into the State from Great Britain through Northern Ireland and the resulting non-payment of VAT at import, Revenue changed its guidance and indicated that cars imported from Great Britain into Northern Ireland after 31 December 2020 could only be subsequently imported into the State and reregistered here after they were declared to customs and customs duty, if applicable, and VAT at import were paid. This ensures that they are liable for VAT and Duty on the same basis as used cars brought into the State from Britain. The guidance also indicated that used cars imported into Northern Ireland from Great Britain prior to 1 January 2021 would not be subject to the need to complete a customs declaration and would not be liable to customs duty or VAT at import. The additional paperwork requirements have been kept to a minimum with a simplified Supplementary Import Declaration being required which allows the VAT on import to be paid.

The current approach explained above addresses the risk of substantial tax avoidance that has been posed since the 14 January announcement, should parties who are importing used vehicles from Britain into the State decide to route the transaction via Northern Ireland. The aim is to bring equal tax treatment to used car imports from Great Britain into the State, whether they be imported through a direct or an indirect route. The approach is intended to be temporary in nature, pending a resolution to the issue between the UK and the European Commission.