Reading the runes

George Anastasi, Senior Policy Manager

Weeks before Rishi Sunak and Ursula von der Leyen, President of the European Commission, signed the Windsor Framework, there were indications that agreement had already been reached on a topic the FLA had previously reported to members.  

Since Brexit, FLA members who export used cars to Northern Ireland from Great Britain have relied on the “margin scheme” which sets out how they should account for VAT. From the outset, HMRC advised businesses that a new scheme was forthcoming, pending agreement with the EU. Then on 25 January, a whole month before the press conference on the Windsor Framework, HMRC quietly revealed that the “second-hand motor vehicle payment scheme” would be introduced from 1 May 2023 to replace the margin scheme. There was no suggestion that a deal had been reached with the EU but such a scheme could only have been possible with their agreement.

It seemed likely therefore that an announcement on a broader agreement was imminent, and exactly four weeks later this is precisely what happened.

The FLA has been keeping a close eye on developments with respect to Northern Ireland as not only will they affect VAT, but it is likely that aspects of the Government’s support schemes provided via the British Business Bank (BBB) could also be impacted. This is because the schemes are affected by EU state aid rules in Northern Ireland, making them much more complex to administer. Thankfully, the agreement appears to dramatically simplify how the state aid rules are applied and limit their burden. We have yet to have confirmation from the BBB on the implications for the Recovery Loan Scheme but we will report this to members once the position is confirmed.

The above serves to highlight how important it is to read the runes. In this case, a small change on VAT foreshadowed the front pages a month later. Here at the FLA, we will continue to keep members apprised of developments in their sector.

Published 08 Mar 2023