New UK-EU “Reset” Deal: A Quiet but Crucial Update for VAT and Trade

Following a summit in London between the United Kingdom and the European Union, an agreement was reached on 19th May 2025 with the aim of “resetting” the post-Brexit relationship between both parties. Whilst there many topics covered in this agreement, it’s important to highlight the often-overlooked implications for VAT and trade, especially for businesses engaged in cross-border trade involving Northern Ireland.

Continued evolution for VAT under the Windsor Framework

The deal does not introduce new VAT legislation. Instead, it builds upon the current Windsor Framework. reaffirming the UK’s and EU’s commitment to easing trade frictions, while maintaining the integrity of both the UK internal market and the EU single market. Under the Windsor Framework, the UK regained limited control over VAT rules in Northern Ireland, allowing it to apply certain VAT changes, such as zero rates on energy-saving goods, while still aligning with EU rules for cross-border trade.

Northern Ireland continues to follow EU VAT rules for goods, while allowing the UK to apply lower VAT rates on certain installations (like heat pumps and solar panels) that are unlikely to cross into the EU from there.

From January 2025, the UK is no longer required to apply the EU’s VAT scheme for small enterprises in Northern Ireland. Instead, it can apply a UK-specific scheme, provided turnover limits align with EU rules to prevent misuse.

Goods Not at Risk: A Crucial Mechanism

One of the most important VAT-related elements that continues to evolve is the “goods not at risk” classification. Under the Windsor Framework, this system allows goods that are destined to remain in Northern Ireland (and will not enter the EU single market) to avoid full EU customs and VAT rules.

Goods deemed “not at risk” may benefit from UK VAT rules rather than being subject to full EU VAT treatment. This includes eligibility for reduced rates and simplified documentation for businesses. For companies in Great Britain selling to customers in Northern Ireland (particularly wholesalers and retailers), being able to classify goods as “not at risk” significantly reduces the administrative and financial burden.

The UK and EU are working together to finalise a detailed list of goods that can be presumed “not at risk” of entering the EU from Northern Ireland. This list will be valid for five years and subject to regular review and mutual agreement.

This mechanism forms a vital part of ensuring smoother trade, while maintaining necessary safeguards for the EU internal market.

Looking Ahead

Whilst the May 2025 UK-EU agreement doesn’t introduce sweeping VAT changes, it cements cooperation, and reinforces the path laid out by the Windsor Framework. Businesses should watch closely as the “goods not at risk” list is formalised, and additional simplifications potentially emerge from continued technical talks.

If you wish to discuss any VAT related aspects for the UK, or more specifically for trading within Northern Ireland, please contact our VAT Consultants via the below link and we will be happy to assist you.