Rachael Singh, Accountancy Age, Monday 23 August 2010 at 10:32:00

Taxman withdraws zero rate and introduces reverse payments of VAT on carbonemission trading

HM Revenue & Customs has unveiled its proposals on reverse VAT charges inrelation to carbon trading.

Due to escalating VAT fraud around carbon trading HMRC introduced a zero rateof VAT in July 2009 - while it awaited an EU-wide directive.

The taxman has now unveiled its proposed implementation of a reverse chargeon VAT payments on carbon trading. At the same time the zero rate of VAT will bewithdrawn.

From 1 November, subject to parliamentary process, it will be theresponsiblity of the customer rather than supplier to inform HMRC of VATpayments on carbon emissions, purchased through the EU emissions trading scheme.

The EU-wide directive to provide a reverse option for all member states wasadopted in March.

Further reading:

EUintroduce reverse VAT for carbon trading

HMRC'szero-rated carbon VAT could create 50m revenue hole

HMRCuncovers VAT fraud in carbon trading