Two principles should be applied when reforming the Terminal Markets Order.
I was interested to read the recent article on the proposed reform of the Terminal Markets Order (‘Taxing commodities: reforming the VAT Terminal Markets Order’ (Matthew Greene & Anastasia Nourescu), Tax Journal, 8 September 2023).
Having been involved on the precious metals application of the TMO over the years, I’m very aware that the TMO as written and as actually implemented differs in a number of areas. This was one of the reasons why the HMRC/Bullion Market agreement was agreed some years ago as an attempt to capture various ‘rulings’ that had been adopted.
Based on my experience, reform needs to encompass two basic principles which are largely already features of the VAT regime for commodities markets as currently interpreted.
Firstly, transactions whether on or off the commodity markets that do not result in physical delivery outside the control of a designated member should automatically qualify for zero rating.
Secondly, any transaction that is not capable of going to physical delivery (for example, derivatives) should be treated as financial supplies.
Applying these two principles minimises the scope for fraud and avoids the need for large amounts of VAT to be funded and accounted for.
Whatever is decided, one plea I would make is that all practices are fully disclosed in the public domain and in this regard HMRC need to up their game in maintaining the currency of their guidance.
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Reader feedback: reforming the TMO
Two principles should be applied when reforming the Terminal Markets Order.
I was interested to read the recent article on the proposed reform of the Terminal Markets Order (‘Taxing commodities: reforming the VAT Terminal Markets Order’ (Matthew Greene & Anastasia Nourescu), Tax Journal, 8 September 2023).
Having been involved on the precious metals application of the TMO over the years, I’m very aware that the TMO as written and as actually implemented differs in a number of areas. This was one of the reasons why the HMRC/Bullion Market agreement was agreed some years ago as an attempt to capture various ‘rulings’ that had been adopted.
Based on my experience, reform needs to encompass two basic principles which are largely already features of the VAT regime for commodities markets as currently interpreted.
Firstly, transactions whether on or off the commodity markets that do not result in physical delivery outside the control of a designated member should automatically qualify for zero rating.
Secondly, any transaction that is not capable of going to physical delivery (for example, derivatives) should be treated as financial supplies.
Applying these two principles minimises the scope for fraud and avoids the need for large amounts of VAT to be funded and accounted for.
Whatever is decided, one plea I would make is that all practices are fully disclosed in the public domain and in this regard HMRC need to up their game in maintaining the currency of their guidance.
