VAT emissions allowances
New VAT legislation came into force on 1 November 2010 to introduce a new reverse charge accounting mechanism for supplies of emissions allowances (also known as ‘carbon credits’). The new rules replace the interim zero rate for emissions allowances which had been introduced on 31 July 2009.
The reverse charge mechanism is being introduced to combat the growing problem of Missing Trader Intra-Community (MTIC) fraud in relation to trading in emissions allowances.
The reverse charge will not apply to supplies of options for emissions allowances which are not covered by the EU legislation permitting the reverse charge.