Two-tier system applies for post-Brexit vehicle imports from North and Britain

Post-Brexit VAT changes between the Republic and Britain have added thousands of euro to the cost of imported second-hand cars from England, Scotland and Wales - but not Northern Ireland.

The imposition of VAT on second-hand cars coming from England. Scotland or Wales to the Republic will add more than €4,000 to the price of a car with a value of €20,000 in the Republic.

Latest figures for vehicles imported to the Republic show a growing market for foreign used cars , with a record 109,000 imported primarily from Britain in 2019. This compared to 70,000 in 2016.

In comparison, new cars registered in Ireland fell from 141,000 in 2016 to 113,000 in 2019.

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Since the Brexit transition period ended on January 1st, the UK is now deemed a “third country” by the EU, meaning VAT becomes payable on second-hand goods from there.

However, as Northern Ireland is still treated as being within the EU Customs Territory, under the Northern Ireland Protocol, cars imported to the Republic from the North do not have to pay additionalVAT.

The Society of the Irish Motor Industry said it does not expect Northern Ireland to become a “back door” for used vehicles from Great Britain transiting through the North.

Brian Cooke, director general of the society, said the Northern Ireland market in second-hand cars by itself would not be large enough to supply the Republic. He said second-hand cars being sold into Northern Ireland from England, Scotland or Wales will also attract a VAT charge, effectively closing the “back door”. The VAT charge is payable when importing into Northern Ireland as the North is to remain within the EU customs territory.

Cars imported to the Republic from either the North or Britain will continue to be liable for Vehicle Registration Tax (VRT), the amount of which is calculated on the age and mileage of the vehicle.

In a statement, Revenue said : “If you import a car from Great Britain from January 1st, 2021 customs formalities apply. In addition to completing a customs declaration you will have to pay customs duty (if applicable), VRT and VAT”. Revenue confirmed neither a customs declaration nor VAT would be payable on second-hand vehicles coming from the North.

UK tax authority HMRC confirmed individuals and motor dealers in Northern Ireland would have to pay VAT on second-hand cars imported from Britain. The move will also add thousands of euro to the price of second hand cars imported into Northern Ireland from Britain.

A spokesman for HMRC told The Irish Times the UK government “is aiming to minimise disruption for Northern Ireland traders and is continuing to explore options for addressing the impacts”.

One exemption already in place allows VAT-registered dealers in Northern Ireland to claim VAT relief on purchases of vehicles from VAT-registered corporations, such as car hire companies and fleet owners.

Mr Cooke said the Society of the Irish Motor Industry believed the changes would make it more complex for dealers in the North leading to a rise in price, as the market there aligns more with the Republic. “In fact we are seeing that rise in prices in Northern Ireland already”, he said.

Phil Fitzgerald, a used car importer based in Naas, Co Kildare said the changes would mainly impact dealers in Northern Ireland who can not source “margin” sales of second-hand cars in the UK, without paying VAT.