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EU gives UK final warning on commodity trading VAT

  • EU VAT
  • 20 July 2018 | Richard Asquith

EU gives UK final warning on commodity trading VAT

On 19th July, the EU Commission (EC) issued a final warning, ‘reasoned opinion’, requesting it to start charging 20% VAT on key commodity derivatives traded under the Terminal Markets Order (TMO). UK VAT rules currently provide for VAT zero-rating of a broad range of transactions in commodities and commodity derivatives. This includes two sectors where London is the leading global marketplace:

  1. Terminal Markets - London Metal Exchange, the London Bullion Market, the London Platinum and Palladium Market or the London Rubber Market; and
  2. Commodity derivative trades with no physical delivery of goods.

The UK now has two months to act or face a referral to the European Court of Justice (ECJ).

 

The EC had already issued the UK with a notification of infringement proceeding on 8thMarch 2018 contending the UK was acting illegally by giving the VAT subsidy. Irrespective of the outcome of Brexit, the 2-year transition period will mean the UK will still be liable to any eventual ruling by the ECJ.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.