Reasons to opt to tax
You may wish to opt to tax a supply of investment gold because you can then reclaim all input tax directly attributable to that supply.
When you can opt to tax
You may only opt to tax supplies of investment gold made to another taxable person. You may also opt to tax investment gold coins if you produce the coins yourself. Supplies of investment gold to non-taxable persons will always be exempt.
Investment gold is either:
(a) gold of a purity not less than 995 thousandths that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets.
(b) a gold coin minted after 1800 that is:
of a purity of not less than 900 thousandths
or has been, legal tender in its country of origin
of a description of coin that is normally sold at a price that does not exceed 180 per cent of the open market value of the gold contained in the coin
(c) an investment gold coin as specified in Investment gold coins and VAT (Notice 701/21A).
Opting to tax if you produce or transform gold into investment gold
As long as you’re a taxable person you may opt to tax any supply of investment gold to another taxable person.
You must notify HMRC's Written Enquiries Section if you intend to opt to tax. If you do not receive an acknowledgement within 28 days, you must check that they have received the notification.
Written Enquiries Section Alexander House Victoria Avenue Southend Essex SS99 1BD
Opting to tax if you supply gold for industrial purposes
If you’re a taxable person, who as a normal part of your business supplies gold for industrial purposes, you may only opt to tax certain supplies of investment gold, but you need to get HMRC's agreement first.
To get HMRC's agreement for you to opt to tax your supplies of investment gold, you must write to HMRC's Written Enquiries Section giving your VAT registration number and confirming that you normally trade in gold for industrial purposes. If they agree they will send you a letter of approval within 28 days. They will normally impose conditions and the letter will also explain what these are and tell you when you can start opting.
HMRC should accept that you normally supply investment gold for industrial purposes if you can show that you do so on a regular basis.
Once you have received HMRC's agreement, you may opt to tax supplies of investment gold bars or wafers you make to other taxable persons.
HMRC may withdraw their approval for the protection of the revenue.
Opting to tax if you act as an agent
If you’re acting for a named principal and your principal has opted to tax, you may opt to tax your services in so far as they are related to your principal’s ‘opted’ supplies of investment gold.
You must inform HMRC's Written Enquiries Section that you intend to opt to tax your services. If you do not receive an acknowledgement within 28 days, you must check that they have received the notification.
How to produce invoices if you opt to tax
As opting to tax a transaction is simple - once you have fulfilled the conditions set out above all you need to do is to include the following statement on your invoice.
‘We have opted to tax this transaction.’
But note that once you’ve opted to tax a particular supply you cannot change your mind and exempt it.
The special accounting scheme for gold transactions
The special accounting scheme for gold is compulsory.
About the special accounting scheme
The special accounting scheme for gold is to be used for the transactions in gold listed below between VAT-registered traders.
Under normal VAT procedures, if you’re a VAT-registered trader selling goods you issue a VAT invoice and receive payment for the price of the goods and the VAT due on the sale. You (as the seller) then account to HMRC for this VAT on your next VAT return.
The scheme transfers the responsibility for paying the VAT on certain transactions in gold from the seller to the buyer.
When to use the special accounting scheme
The special accounting scheme for gold must be used when:
the seller and the buyer are both VAT-registered persons, or are persons liable to be registered as a consequence of the transaction, or other transactions
the supply by the seller is by way of business and the buyer is making the purchase in connection with any business carried on by them
you carry out treatment or processing work on your customers’ goods, and the goods produced are fine gold, gold grain of any purity, or gold coins
The special accounting scheme for gold will apply if you supply:
goods consisting of fine gold and gold coins - except coins traded under the second-hand margin scheme. See Notice 718: the Margin Scheme and global accounting, supplies of dental gold, gold targets and gold slugs are excluded
goods containing gold for which the amount paid or payable for the supply (apart from any VAT) does not exceed, or exceeds by no more than a negligible amount, the open market value of the gold contained in the goods - the open market value of the gold is the ‘fix price’ of the gold at the time of supply, this is the price set in the twice-daily meetings by London Gold Fixing Ltd. and includes supplies of scrap (including live scrap - scrapped jewellery, broken jewellery, watch cases, cigarette cases and so on) and sweepings - supplies of part manufactured or finished jewellery, gold compounds and semi manufactured carated products, are excluded (except gold grain)
services of treating or processing goods to make fine gold, gold grain or gold coins
investment gold regardless of whether the supply is classed as a supply of goods or a supply of services where the seller has exercised the option to tax outlined above, or where the supply is between a member and a non-member of the London Bullion Market Association
Hammad Baig can assist with the VAT repayment issues arising out of the special accounting scheme, contact Hammad immediately upon receipt of an assessment.