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HMRC internal manual

VAT Gold

Special features of investment gold


The legislation for exempting investment gold has four unusual features:

  • an option to tax;
  • limited right to deduct input tax attributable to exempt supplies of investment gold;
  • special invoicing requirements for traders in investment gold; and its own penalty regime; and
  • its own penalty regime.

An option to tax

The option to tax is available in order that businesses may reclaim input tax associated with an opted supply of investment gold. This is particularly relevant to businesses which normally sell investment gold to be used for industrial purposes. Without it there would be ‘sticking’ tax on gold that moves from the investment to industrial markets. The option allows any sticking tax to wash through to the final onsumer. In respect of coins, only a producer of coins can opt to tax his supply. Traders must notify HMRC if they intend to make use of this provision. Please see Notice 701/21 Gold. Unlike the option to tax on property, the option to tax investment gold applies to individual transactions and therefore a trader may make both taxable and exempt supplies of investment gold.

Input tax attributable to exempt supplies of investment gold

There is a limited right of deduction to input tax used to make these exempt supplies. This eliminates the sticking tax on the costs of refiners and producers where these costs are directly linked to the production of investment gold. This particular VAT treatment was introduced because of the nature of trading on the gold market where the price of gold, both investment and non investment, is fixed on a daily basis. If refiners and producers had to bear the cost of the VAT on their production costs it could result in their trading at a loss.

Invoicing, record keeping and notification requirements for traders

There are special invoicing requirements for traders in investment gold. They must, as a minimum, keep an account of all transactions in investment gold, subject to certain de minimis limits and keep documentation to allow identification of their customers for a period of six years. Traders must also notify HMRC if they make supplies of exempt investment gold above certain de minimis limits. These obligations were introduced with the exemption for investment gold because countries like the UK already had an established fraud problem where tax free gold was purchased in other Member States and converted into taxable products (e.g. jewellery) which were then sold ‘off record’ in the UK. Because there is no input tax on such purchases, identifying such transactions proved very difficult with assurance methods in place at the time. Therefore the strict record keeping requirements for trades in investment gold are necessary for audit trail purposes and penalties must be considered for any failures to comply.


To ensure that audit trails in investment gold are maintained and because of the inherent risk of fraud, the special penalties for failure to keep an audit trail were introduced in 2000. The existing penalties for failure to keep proper records were not thought to be a sufficient deterrent for those trading in a high-value commodity such as gold which is easily transformed into taxable products. Therefore the penalty is set at the standard rate of VAT and based on the value of the transactions for which the required records have not been kept. There is a right of appeal and the Commissioners also have discretionary powers in respect of a person’s liability to a penalty. For further information and advice please contact Central Policy (Tax administration advice).