Briefing document

 

The Windsor Framework: a new way forward for Northern Ireland?

2/03/2023

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Key Developments

After two years of negotiations since the Northern Ireland Protocol came into force, the UK and the EU have reached an agreement in principle to change the way it is implemented.

  • Creation of Red and Green Lanes for goods entering NI 
  • Substantial Agri-food easements, for GB-NI movements 
  • UK medicines available in NI
  • More UK flexibility on VAT and alcohol duty

The UK Government has succeeded in obtaining concessions from the EU on policy proposals that were previously thought to be unworkable and in return has accepted that Northern Ireland will still be treated differently in certain areas and subject to some EU laws. As a result, Northern Ireland will retain access to the EU single market for goods, whilst also being able to trade freely with Great Britain.

The Windsor Framework addresses many of the areas of the Northern Ireland Protocol that were never fully implemented, such as customs procedures for parcels, and establishes new red and green lanes for goods moving to and from Northern Ireland (NI). All of which contributes to a large reduction in friction within the UK’s internal market.

Trade

The Windsor Framework (the “Framework”) creates a new system for goods moving to and from NI. A light-touch “green lane” for goods that are destined for NI and a “red lane” with additional customs checks for goods at risk of entering the EU single market have been created.

The green lane will work on the basis of a trusted trader scheme, with businesses able to move goods by using “standard commercial data provided upfront through a simple online portal instead of needing to contend with international customs paperwork”.  The UK Government has stressed that accessing the green lane via the UK Internal Market Scheme will be available for UK businesses, via a “once and done” registration process. Any business already registered on the UK Trader Scheme will automatically be registered for the new scheme.

Food providers will be able to use the green lane and there will also be far fewer physical checks on food movements, with a risk-based approach to be adopted. Notably, this means that chilled meats will also be available in NI if they are available in the UK. In order to facilitate these easements, the UK has agreed to share customs data with the EU in real time, conduct market surveillance and accept the jurisdiction of the European Court of Justice (ECJ) in limited areas.  The UK will also establish a “not for EU” label in order to differentiate goods that are destined solely for NI.

Other easements included in the agreement remove paperwork for people and businesses sending parcels to NI. Business to consumer parcels will rely on a trusted trader scheme, due to be established by October 2024, to benefit from reduced customs procedures.  In addition, consumer to consumer parcels will effectively benefit from a waiver on all customs procedures. Business to business parcels will rely on the trade arrangements above.

Finally, all medicines approved by the UK regulator will also be able to be used in NI. This point is drawn very widely and appears to move medicines, for use in NI, more fully into the scope of the Medicines and Healthcare products Regulatory Agency (MHRA). The Framework contains several other easements, the detail of which can be found in the government’s policy papers and sector explainers. The EU has also published an explainer, which can be found here.

Early reaction to the new trade measures appears to be positive, with politicians and businesses generally giving them a warm welcome. While the new arrangement goes a long way to resolving some of the problems of the Protocol, it does still mean that NI will be treated differently to the rest of the UK in specific areas, and there has been some criticism of the continued application of EU single market rules (and ECJ oversight). However, taken in the round this agreement represents a significant reduction in frictions between Great Britain (GB) and NI and will be welcomed strongly by businesses.

Tax

Under the new Framework, there will be additional flexibility for the government to apply VAT changes UK-wide.  One example is that energy-saving materials such as heat pumps or solar panels installed in immovable property will be able to be zero-rated in NI, as they are considered not to be at risk of entering the single market.  The UK and the EU have also committed to working together to identify a longer list of products, where further easements can be granted.

When they take effect this summer, reformed UK alcohol duty rates will be able to be applied in NI. However, the UK may not charge below the EU minimum level in NI, thereby protecting the level playing field and allowing NI to remain aligned with GB provided the UK’s rates remain higher than EU rates. In addition, an “Enhanced Coordination Mechanism” has been established as part of the Joint Committee to monitor and address Protocol-related tax issues.

Implementation 

The detail of the Framework is now being widely examined and is expected to be formally approved by the UK-EU Joint Committee. The UK Government has also said it would facilitate a House of Commons vote to gain political support for the deal, and the opposition has already indicated its support. The government has also agreed not to proceed with the Northern Ireland Protocol Bill introduced by the Johnson administration.

Legislation will be required to fully implement the new arrangements, which will enter into force in multiple phases. Some measures will enter into force later this year and the bulk of the remainder in 2024, with a few measures stretching into 2025.

While not strictly part of the Framework itself, the agreement also establishes a so-called “Stormont Brake” which could affect how the Framework operates in the years to come. The “brake” can be activated by 30 cross-party Members of the Legislative Assembly in NI in the event that new EU goods laws stand to have a significant impact on the lives of the people of NI, giving the UK Government a veto on their application within NI territory. However, there are several caveats that determine when the brake may be used and in practice its use is expected to be limited. 

What should businesses do now?

The Framework, once implemented, should mean that businesses face less onerous customs requirements when moving goods from GB to NI. However, there will be some initial actions for businesses, including relabelling products which are “not for EU”, establishing processes for sending goods in the correct lane and signing up to trusted trader schemes if they are not already registered under the UK Trader Scheme. 

For help with any of these actions or for a deeper understanding of the Framework, Deloitte’s specialists are on hand.