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:
- Terminal Markets – London Metal Exchange, the London Bullion Market, the London Platinum and Palladium Market or the London Rubber Market; and
- 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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