VAT & Indirect Taxes

Windsor Framework updates

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On 27 February 2023, an agreement in principle was reached between the UK Government and the European Union (EU), titled the “Windsor Framework”.

The purpose of this agreement is to address issues arising from the Northern Ireland (NI) Protocol, which was agreed as part of the UK’s exit from the EU in 2020.

We have set out below the key issues covered by the Windsor Framework.

Customs – Green/Red Lane

·       Customs procedures for goods moving from Great Britain (GB) to NI, not destined for the EU, will be reduced with the introduction of an expanded UK Trader Scheme (which will become known as the New Internal Market Scheme). The expanded scheme will permit the movement of goods “not at risk” of entering the EU to enter NI through a “green lane”.

·       Movements of goods through the green lane will see checks and paperwork significantly reduced with a simplified customs declaration (based on 21 data fields) on the Trader Support Service (TSS) portal or alternative such as the Customs Declaration System (CDS) to be submitted. Commodity codes will only be required upfront at registration and not required for every movement. The target start date for this expanded scheme is September 2023.

·       Use of the green lanes will be available for goods for final sale or use in NI or goods entering NI that are not subject to commercial processing in NI. The annual turnover threshold for goods not subject to commercial processing should increase from £500K to £2 million.

·       Access to the updated UK Trader Scheme will be expanded to allow application from GB businesses.

·       Goods intended for or at risk of entering the EU will enter NI in a “red lane”. These entries will be subject to full customs checks and controls. For traders bringing goods into NI in the red lane, a new tariff reimbursement scheme will be introduced to allow for reimbursement of Custom Duties paid where traders can demonstrate the goods did not ultimately end up in the EU.

·       For the movement of goods from NI to GB, most export declaration requirements will be removed.


·       Parcels will be allowed to move from GB to NI without the need for customs declarations provided certain conditions are met and the carrier of the parcels is authorised under the UK Trader Scheme to directly transport goods to NI. The rules for parcels will apply to private individuals and economic operators.

VAT & Excise

·       VAT rates to “apply UK-wide”.  In particular, the current 5% VAT rate in NI on energy-saving materials (such as solar panels and heat pumps) would be cut to 0% to align with GB, along with what the UK Government describes as “full flexibility” on VAT rates in the future, “by establishing new categories that can be applied for VAT purposes where goods are consumed in Northern Ireland”.

·       NI will not be required to apply the EU special VAT scheme for small enterprises, due to be introduced in 2025, which is aimed at placing a limit of €85,000 on EU VAT registration thresholds for small businesses established in each EU Member State.

·       NI shall not be required to apply the EU special scheme for distance sales of goods from GB to NI. This should ensure VAT obligations for these transactions from GB to NI are equivalent to the same transactions within Great Britain

·       From 1 August 2023 the UK government will introduce a new system for calculating excise duties, creating a standardised series of tax bands based on alcohol by volume (ABV). The Windsor Framework permits the system’s introduction in NI as long as (i) the effective rates are not below the duty minima rates as laid down in the EU’s Excise Directive, and (ii) apply no less favourably to products supplied from the EU as they do to like domestic products. 


·       There is currently a grace period for compliance requirements related to certain agricultural goods in place for movements of goods between GB and NI.

·       Under the Windsor Framework, a new scheme will be introduced that should reduce the amount of paperwork required so that a single form can cover a single movement rather than multiple forms related to a specific movement. The scheme will be relevant to all such goods, not just those produced in the EU or UK.

·       Identify checks for retail goods should reduce to 5% by July 2025 and physical checks will be risk-based.

·       Pre-packed retail goods for final consumption in NI will be subject to UK public health standards.

·       The new scheme should enable British products including chilled Lincolnshire sausages, chilled pigs in blankets, chilled chicken in garlic butter, Scottish haggis, black pudding, seed potatoes and cake whitener, to be moved to NI.

·       Certain labelling will be required under the new scheme however the number of checks, including veterinary checks, should ultimately be reduced. It is anticipated that the new scheme will cover other fresh produce, such as fruit and vegetables, in future and relate to the whole of the UK, not just NI.

·       The Windsor Framework sets out a number of EU safeguards, namely (i) SPS inspection facilities, (ii) real time data sharing from UK databases, (iii) suspension of facilities for breaches, (iv) ongoing monitoring of retail goods, (v) the gradual introduction of “not for EU” labelling over the period October 2023 – July 2025 and (vi) EU rules on animal and plant health will continue to apply.   

Human Medicine

·       Patients in NI will be able to access the same medicines as the rest of the UK.

·       Medicines placed on the market in NI will no longer be regulated by EU-wide authorisations granted by the European Commission. Instead, the UK regulator will approve all medicines on the market in NI.

·       Drugs and products produced in NI will continue to enjoy frictionless access to the EU Single market.

State Aid

·       The Windsor Framework will impose a stringent set of tests to ensure that there must be a proven real, genuine and material link to NI’s trade with the EU for EU State Aid rules to apply.

Governance – The “Stormont Brake”

·       The Windsor Framework includes a new safeguard, referred to as the “Stormont Brake” which is designed to suspend the implementation of new EU rules on goods in NI applicable as a result of the NI Protocol.

·       The Stormont Brake will be triggered by a vote by the Northern Ireland Assembly which, in line with the Belfast (Good Friday) Agreement, must be a cross-community vote. Following the triggering of the Stormont Brake, the implementation of the EU rule in NI will be suspended, pending agreement between the UK and the EU.

·       Any dispute between the UK and EU will be governed by independent arbitration.  Should the UK veto the introduction of the EU rule in NI, the EU reserves the right to take necessary remedial action.

What Happens Next?

·       The UK Government has indicated that key stakeholders (including MPs and Northern Ireland political parties), will have time to consider the content of the Windsor Framework, before the terms of the deal are put to a vote in the UK House of Commons.

·       In order to be implemented, the Windsor Framework will be required to be adopted by the Joint Committee of the Withdrawal Agreement and any changes required to UK domestic legislation will need to be passed by the UK and EU.

·       The Agreement will require ratification by EU Member States.

·       In the meantime, it is likely that further guidance on the implementation of the Agreement will be published by both the UK and EU.

We will keep you updated on future announcements and if you would like to discuss further the potential impact the changes under the Windsor Framework may have on your business, we would be happy to arrange  a meeting.

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