With the advent of online shopping, many of us have at one time or another bought goods directly from the UK, from spare parts, to ink, to clothes and shoes.
Historically, Irish farmers turned to their nearest neighbours to get hold of quality used tractors and machinery, and with the weakening of sterling over the past two years, the number of second hand cars imported from the UK into Ireland has rocketed.
How would a Brexit upheaval change the market for importing from the UK?
For Irish private individuals, including farmers who are unregistered for VAT, the current system gives almost seamless transparency.
An Irish private individual travels to the UK to purchase a used car, the price quoted by the dealer is the final price payable by the Irish purchaser, with the exception of VRT, which is payable at import.
Or an Irish farmer, unregistered for VAT, buys a second-hand baler in the UK for £10,000; the price charged by the dealer is the final price, no VAT is payable in Ireland, and no customs duty is payable. (Note: a separate rule requires the farmer to register for VAT if his purchases exceed €41,000).
So how is all this set to change in the event of Brexit?
For Irish persons importing goods from outside the EU, VAT is payable in Ireland, where the good being imported has a customs value (including cost, transport, insurance and handling charges) of over €22.
In the event of a hard Brexit, with the UK seen as a non-EU country, there will be an immediate added cost of 23% when it comes to importing goods such as secondhand cars. In practical terms, then, an Irish person importing a car from the UK which currently costs, say £10,000, will be obliged to pay Vehicle Registration Tax at the appropriate percentage, but also pay VAT at 23%. Currently, the vast majority of secondhand cars sold from the UK to Ireland are not subject to VAT in either Ireland or the UK, so the imposition of VAT will be a boon to both new car retailers and the Irish exchequer, but ultimately at the cost of Irish consumers who can currently source relatively cheap imports from the UK.
The same position applies in respect of secondhand machinery sourced from unregistered farmers or dealers operating the margin scheme in the UK, with a value of less than €41,000. Currently, the price paid to the UK supplier is the final price. In the event of a hard Brexit, VAT will be due at the point of importation on such machinery at a rate of 23%, adding directly to the cost of that machinery for Irish farmers.
Even for VAT-registered farmers, the current procedure of quoting your Irish VAT number to avoid paying UK VAT may no longer work, in the event of a hard Brexit. In such a case, Irish VAT-registered farmers may be obliged to pay UK goods sales tax (a equivalent to VAT), possibly with no right to recover same at the point of export. Meanwhile, they too would face a charge to Irish VAT at the point of import.
In addition to VAT and VRT for vehicles, the prospect of customs taxes would also weigh in. Importing any good from outside of the EU with an intrinsic value of more than €150 usually carries customs duty.
The rate of duty depends on classification of the goods and the relationship the EU has with that country. For instance, importation of used tractors into the EU from Russia carries a 16% customs tariff, whereas importation of used diesel cars is set at a 10% tariff, and the importation of balers at 0%.
Meanwhile, imports of hay and straw from outside the EU requires veterinary inspection at the point of importation.
The financial implications to Irish farming of a a hard Brexit have not been spelled out.
Farmers need clarity on what additional costs would apply either directly to them in the case of a direct import, or more likely in the form of added costs applied by Irish retailer importers. Equally, on the sales side, what is the impact of customs duties on the likely sales prices of goods? Farmers armed with this knowledge can make better preparations.