Jackie Cahill (Tipperary, Fianna Fail)
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124. To ask the Minister for Finance if, in the case of a car being imported into Northern Ireland from England and then being converted into a hearse in Northern Ireland before import into Ireland, VAT is chargeable on the vehicle upon registration in Ireland; if so, if the VAT is chargeable on the price of the vehicle when it enters Northern Ireland from England or when it enters Ireland from Northern Ireland; if so, when this charge came into place; the number of hearses that have been charged for VAT under these conditions since the UK left the EU; and if he will make a statement on the matter. [6299/23]

Michael McGrath (Cork South Central, Fianna Fail)
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UK Withdrawal Agreement

In accordance with the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community , from 1 January 2021 onwards, the importation of a motor vehicle from the United Kingdom (excluding Northern Ireland (NI)) is treated as an import from a third country, i.e. a non - EU Member State.

If a vehicle is imported directly or indirectly from Britain (United Kingdom excluding Northern Ireland) on or after 1 January 2021(including an import carried out indirectly via Northern Ireland), the importer is required to complete a Customs import declaration, pay Customs Duty, if applicable, and Value Added Tax (VAT) on import, prior to presenting the vehicle for registration. Vehicle Registration Tax (VRT) is payable at registration, with the VRT calculation and collection being completed by the NCT centres.

Vehicles that qualify as ‘New Means Of Transport’

Vehicles that are New Means of Transport brought into the State from another European Union (EU) Member State, including Northern Ireland (NI), are always subject to Value-Added Tax (VAT) in the State. A New Means of Transport is a vehicle which is 6 months old or less, or has travelled 6,000 km or less. The VAT is normally payable at registration in the State. VAT on a New Means of Transport is charged on the price of the vehicle when it enters Ireland from Northern Ireland or another Member State.

Used Vehicles

On 14 January 2021 the UK announced that trade in used cars between Great Britain and Northern Ireland would return, with effect from 1 January 2021, to the terms that had applied prior to the end of the transition period. A used vehicle is any vehicle other than a New Means of Transport.

This announcement created a significant tax avoidance possibility whereby the trade in used cars from Great Britain to this State could avoid customs duty and VAT if they were moved through Northern Ireland. After considering the scale of the tax avoidance threat posed by these circumstances, Revenue published guidance on its website on 8 February 2021 indicating that used cars imported from Great Britain into Northern Ireland after 31 December 2020 could only be subsequently imported into the State and re-registered here after they were declared to Customs and customs duty (if applicable) and VAT at import were paid. This ensures that these vehicles are liable for VAT and Duty on the same basis as used cars brought into the State directly from Great Britain.

The guidance is published on Revenue’s website at the following link:

www.revenue.ie/en/vrt/guide-to-vrt/registration-of-imported-used-vehicles/index.aspx

These changes mean that vehicles first registered in Great Britain, and subsequently registered in Northern Ireland after 31 December 2020, will be subject to additional requirements if imported into the State. These additional requirements must be completed prior to presenting the vehicle for registration at an NCT centre. Used cars imported into Northern Ireland from Great Britain prior to 1 January 2021 and subsequently moved to this State do not require a customs declaration and are not liable to customs duty or VAT at import. Revenue requires satisfactory evidence that cars were in Northern Ireland before 1 January 2021 where such a claim is made which should not present any difficulty in legitimate cases.

Where a second-hand vehicle has been imported from Great Britain after 31 December 2020 and the Customs formalities were completed in Northern Ireland, the person wishing to register the vehicle in Ireland should first contact Revenue as there will be a VAT liability to be discharged prior to registering the vehicle for VRT. If a taxable person does not have proof of a declaration to Customs in Northern Ireland, they must complete a Customs import declaration and pay Customs Duty, if applicable, and VAT on the customs value of the vehicle plus the customs duty payable. This must be done before presenting the vehicle for registration. The VAT is charged on the customs valuation of the vehicle when it enters the State from Northern Ireland.

The current approach outlined 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.

Vehicle Registration Tax (VRT)

The number of used imported hearses registered for VRT purposes since 1 January 2020 to the end of February 2023 were 120 vehicles. The majority of these had a previous registration that was assigned to the United Kingdom.

Revenue is unable to provide data on the amount of VAT collected on these vehicles.