HMRC internal manual

VAT Gold

The London Bullion Market and Central Banks

The London Bullion Market and Central Banks

The London Bullion Market and The London Bullion Market Association (LBMA)

The London bullion market (bullion being refined gold and silver in bar, ingot or wafer form) is an over-the-counter market, which means that Members of the London bullion market typically trade with each other and with their clients on a principal-to-principal basis.

Trading is effected through allocated and unallocated accounts. A client holding an allocated account owns specific bars of metal which are uniquely identifiable. A supply from an allocated account is a supply of goods. A client holding an unallocated account is entitled to a certain value from the overall stock of metal held by a dealer. A supply from an unallocated account is a supply of services.

The LBMA is a trade association formed in 1987 which acts as the co-ordinator for activities conducted on behalf of its members and other participants in the London market. LBMA membership includes commercial banks, bullion dealers, brokers, fabricators, refiners and transport companies who are involved in trading, refining, melting, assaying, transporting and vaulting of gold and silver bullion. The London Bullion Market is listed on the Terminal Markets Order (TMO), but for the purposes of the Order only members of the LBMA can benefit from the zero rating relief.

Under the provisions of the investment gold exemption, Member States are able to waive the exemption for transactions between taxable members trading on a regulated bullion marketand between members and taxable non members. As a simplification measure it is allowed that where the transaction is between taxable members, the Member State is able to waive the requirement to collect the tax, i.e. is able to zero rate the supply. Certain gold transactions on the London Bullion Market by members of the London Bullion Market Association have for some time, prior to the adoption of the Directive, been zero rated under the terminal markets legislation (see VGOLD1700) and essentially this has not changed following the introduction of the exemption. The legislation also allows zero rating for agents, who are members of the LBMA and deal in investment gold.

However please note that since the exemption was introduced zero rating only applies to transactions on the market between members. Supplies of investment gold between members and non-members who are taxable persons are now standard-rated and subject to the conditions of the Special Accounting Scheme for gold – the reverse charge (see VGOLD1500). Supplies of investment gold between members and private individuals are exempt.

As a further simplification measure, LBMA members can account for the tax on behalf ofnon- members who would only become liable for VAT registration as a result of the transactions on the London Market. This measure avoids the need for the VAT registration of businesses who would not otherwise have to register for VAT in the UK.

Central Banks

Supplies of gold and gold coins held in the UK, between Central Banks and between Central Banks and members of the London Bullion Market, are zero-rated. This reflects the unique nature of these transactions.