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UK emissions trading scheme

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In a written ministerial statement, the UK government has announcing that legislation will be introduced to allow a VAT zero rate to apply to trades in UK emissions trading scheme allowances within the VAT Terminal Markets Order, SI 1973/173.

The UK Emissions Trading Scheme (ETS) replaced the UK’s participation in the EU ETS on 1 January 2021. The scheme has been established to increase the climate ambition of the UK’s carbon pricing policy, while mitigating the risk of carbon leakage through free allowances.

The Terminal Markets Order permits VAT zero-rating for transactions on terminal commodity markets in order to avoid the administrative and cash flow burdens of accounting for VAT and should have no effect on the VAT amount collected at the final stage of consumption. This zero-rating will be extended to trades in the UK ETS, with effect from the time when the trades commenced in May 2021.

Issue: 1539
Categories: News