HMRC have published Brief 52/07, which updates VAT policy on determining the place of supply of trading emissions allowances, announced in Business Brief 28/04, to include the treatment of trading in other greenhouse gas emission instruments that have emerged since that time.
Customs Business Brief 28/04 stated that the place of supply of emissions allowances under the EU Emissions Trading Scheme (EU ETS), when traded cross–border, is the place where the customer belongs. However, HMRC were, at that time, unclear about the nature and purpose of other greenhouse gas emission instruments that existed, and since then other greenhouse gas emissions instruments have emerged, with differing objectives.
Having now clarified their understanding of the nature and purpose of these various greenhouse gas emissions instruments under the different Schemes that are currently being, or will be in future, traded cross-border, HMRC have now confirmed that they are subject to the same VAT treatment as emissions allowances.
More detailed guidance about the supply position of Verified Emission Reductions (VERs) will be issued in the near future. However, when supplies of VERs are found to be taking place, their place of supply will be the same as for emissions allowances.
The revised policy takes affect from 23 August 2007 for those transactions that have not yet taken place or where no decision has been taken on the place of supply. However, HMRC are aware that for some cross-border transactions that have already taken place, where they now accept that the place of supply is the customer’s country, rulings were given that they were subject to UK VAT. In the circumstances the parties involved in such transactions can choose whether they want to revisit the arrangements and apply the rules in Brief 52/07, or maintain the position as originally applied.
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