As per the proposed implementation of a reverse charge accounting mechanism, it will be the responsibility of the customer, not of the supplier, to account to HMRC for VAT on supplies of the specified emission allowances, Reuters reported.
The zero VAT rate was implemented as an interim measure to stop the increasing carousel fraud in spot trading of European Union carbon permits, called EUAs, according to HMRC.
The new reverse charge is also applicable for sales of two types of Kyoto Protocol carbon offsets called Emissions Reduction Units (ERUs) and Certified Emissions Reductions (CERs).
Carousel fraud, also known as missing trader fraud, occurs when firms purchase carbon permits in one country without paying VAT and sell them in another, adding tax to the price.
