Voluntary carbon credits standard rated from September

From 1 September 2024 VAT must be accounted for on specified trades of voluntary carbon credits at the standard rate where the place of supply is in the UK HMRC has confirmed in Revenue and Customs Brief 7/2024.

They are currently treated as outside the scope of VAT. This is because when they were first introduced HMRC’s view was that they could not be incorporated into an onward supply and there was no evidence of a secondary market.

However as a result of changes in the market including the emergence of secondary market trading and businesses incorporating voluntary carbon credits into their onward supplies the government has made them taxable for VAT.

The following activities are still outside the scope of VAT:

• the first issue of a voluntary carbon credit by a public authority;
• the holding of voluntary carbon credits as an investment...