Emissions Trading – UK Reintroduce VAT Charges on Carbon Credits

HM Revenue & Customs (HMRC) has announced that it will reintroduce VAT charges on carbon credits after removing the levy last year in response to tax fraud. HMRC is responsible for the administration and collection of taxes.

In a notice placed on HMRC's website, officials confirmed that the new reverse VAT regime would come into effect from 1^st November and would cover EUAs, CER and ERUs. Reverse charge VAT is already in place in the UK for other products such as mobile phones and computer chips that have been subject to carousel fraud, and experts predict the move is unlikely to have a major impact on the carbon market. "Bona fide traders are well used to dealing with VAT, so they should be able to handle this change fairly easily," said Trevor Sikorski.