HMRC internal manual

VAT Gold

VGOLD1300 - Background to the exemption for investment gold

Pre-1 January 2000

Prior to the introduction of legislation on 1 January 2000, investment gold was taxed in the UK at the standard rate except for certain transactions on the London Bullion Market made by members of the London Bullion Market Association (LBMA) and between LBMA members and non-members where the gold isn’t physically delivered. These transactions were (and remain) zero-rated under the Value Added Tax (Terminal Markets) Order 1973 (as amended) - see VGOLD1700.

Because the VAT treatment of gold varied widely between Member States it led to distortion of competition. The UK was particularly at a disadvantage since in several Member States gold was either exempt or taxed at a very low rate. It was therefore felt desirable to introduce a single system for the Vat treatment of investment gold throughout the EU. As well as its effectiveness as a fraud prevention measure, the introduction of the exemption meant that for VAT purposes, investment gold would be placed on the same footing as other investment products, such as stocks and shares.

Post-1 January 2000

The VAT Act 1994, Schedule 9, Group 15 - see VGOLD1700 - exempts supplies of investment gold and qualifying gold coins. Changes were also made to the VAT (Terminal Markets) Order TMO - see VGOLD1700 to continue to allow zero rating for investment gold traded between members of the LBMA on the market but removed the requirement that the gold must not be physically delivered in sales to non-members. The other main legislative changes were the introduction of notification and record keeping requirements for those trading in investment gold and a penalty regime for failure to notify trading ininvestment gold and/or failure to keep records (see VGOLD1400).

Why include coins

A number of coins are bought not for their rarity or numismatic interest but for their value as gold bullion. It would therefore be inconsistent not to include such coins within the investment gold exemption and the legislation does this by excluding coins sold for more than 180% of their gold value content.

A list of qualifying gold coins is published by the Commission in December each year to ensure consistency across the EU. The UK duplicates this in Notice 701/21A Investment Gold Coins, alongside an additional list of gold coins accepted by the UK as qualifying for exemption.