On Thursday 11 February, the European Commission proposed to authorise the United Kingdom to apply a derogation from the VAT Directive regarding Northern Ireland to apply simplified VAT rules on fuel for company cars.
From 1 January 2021, EU VAT legislation ceased to apply in the UK. However, based on the Protocol on Ireland and Northern Ireland, it remains applicable to Northern Ireland for goods to avoid a hard border between Ireland and Northern Ireland. On the other hand, for services, Northern Ireland, like the rest of the UK, is outside the EU.
Consequently, on 27 November 2020, the United Kingdom requested authorisation to continue to apply a particular VAT scheme in Northern Ireland. This scheme provides for flat-rate measures relating to non-deductible value-added tax on fuel costs for business vehicles, which departs from the general rules laid down by the VAT Directive.
Depending on the country, this system has proven reliable and has led to considerable simplification for both companies and the tax administration.
The Commission recommends that the Council of the EU grant this derogation, but to limit it to 31 December 2023, to determine whether the flat-rate scheme still reflects the overall distribution of private and professional use.
Read the proposal: https://bit.ly/2OmXnLs (Original version in French by Marion Fontana)