Posted: 03 August 2009
Issue: Online only
Categories: Update, News, Tax adviser, Legal, Government, Taxable Supplies, VAT

VAT removed from supplies of emissions allowances

The Government has introduced legislation to remove VAT from supplies of emissions allowances - also known as carbon credits - traded within the UK, to prevent the risk of VAT fraud.

The new law follows evidence that commodity trading in emissions allowances is being used by criminals to steal tax revenues from the UK, and that the country may become a major target for such activity in the coming months.

The change will have no effect on legitimate trading, said the Treasury, but it will prevent fraudsters from charging and collecting VAT, which they have no intention of paying to HMRC.

Similar measures have been taken by the administrations of France and the Netherlands to prevent this form of fraud. The Government has sought a derogation from Europeam Union law to cover its short-term action pending agreement with EU partners on an EU-wide solution.

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