June 2024 VATWatch

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VAT Treatment on Voluntary Carbon Credits
 

Effective from the 1st September 2024 the sale of voluntary carbon credits will be treated as taxable for VAT where the place of supply is the UK.

Voluntary carbon credits were previously considered as outside of the scope of UK VAT but HMRC recognises that there have been significant changes in the voluntary carbon credit market, including the emergence of secondary market trading and businesses incorporation voluntary carbon credits into their onward supplies. As such, the updated policy means that VAT needs to be accounted for on certain trades of voluntary carbon credits at the standard rate.

However, the following activities are still outside of the scope of VAT:

  • The first issue of a voluntary carbon credit by a public authority.
  • The holding of voluntary carbon credits as an investment, where there is no economic activity.
  • Donations made to voluntary carbon credit projects.
  • Sales of voluntary carbon credits from self-assessed projects with no independent of third-part verification.

Additionally, the Terminal Markets Order is considered within the updated policy. Currently it provides a VAT zero rate for wholesale commodity transactions made by members on specified terminal markets. From 1 September 2024, HMRC will allow the VAT relief granted under the Terminal Markets Order to apply to contracts in taxable voluntary carbon credits traded on terminal markets, within the terms of the relief.

 
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Private-Hire Vehicle Consultation Gets on The Road! 
 

Since a number of high-profile cases involving ride-hailing apps, a consultation has been announced. The results of which will impact vulnerable people who rely on these services. 

 

The consultation is running for 6 weeks from 18th April to 8th August 2024. It seeks the views of drivers, passengers, businesses, trade associates and anyone interested in or affected by the government’s response to the court judgements. 

 

The government could amend the transport legislation or the VAT legislation so that VAT was no longer due at the standard rate on all private-hire fares. However, this has been estimated to cost the exchequer £750m per annum. 

 

There are other suggestions and views are sought on them There are some interesting themes and topics to consider and Hilary Bevan advises anyone in the industry to contribute their experiences and thoughts during the consultation period.  

 

Thank you for taking the time to read this VATwatch round-up.

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