VAT abolished from carbon credits
Monday August 3, 2009
The government has introduced new legislation aimed at removing VAT from carbon credits traded within the UK.
The new law is designed to prevent the risk of VAT fraud amid a growing trend of fraudsters using commodity trading in emissions allowances to steal VAT revenues.
A loophole in the system means that people can buy credits from other countries free of VAT and then selling them in the UK and charging VAT to make a profit.
Andreas Arvanitakis, senior analyst at Point Carbon, told Business Green: "The suspicion was that it was affecting trade volumes but we don’t know how much of a grip it had really taken in the UK."
French officials initially removed VAT on emission allowances in June, after fraudulent trading took place on the Bluenext exchange. This prompted the Netherlands to follow suit.
Traders have now called for an EU-wide VAT exemption on carbon credits, saying that while the new laws implemented in the UK, France and the Netherlands may stamp out fraudulent activity in those countries, it does nothing to solve the problem elsewhere.