Introduction

HMRC have introduced a reverse charge for supplies of renewable energy certificates. These certificates are issued to gas and electricity generators when they produce energy from renewable means. They are commonly called Guarantees of Origin (GoOs) and are also known as Renewable Energy Certificates (RECS), Renewable Obligation Certificates (ROCS), Renewable Energy Guarantee of Origin (REGO) and International Renewable Energy Certificates (I-RECS).

These certificates can also be bought and sold as a commodity attracting others into the market which creates an opportunity for fraud. A reverse charge means that the customer is liable to account for the VAT rather than the supplier. This removes the opportunity for the VAT to be stolen.

The revision to the law

Section 1(2) of the VAT Act 1994 (VATA) makes the supplier liable for any VAT on supplies of goods or services.

Section 55A of VATA provides that the recipient of a supply must account for the VAT due on supplies of a kind specified in an order made by the Treasury.

EU legislation in Article 199a1(f) of Directive 2006/112/EC allows member states to provide for a reverse charge for supplies of gas and electricity certificates.

A statutory instrument (SI) subject to the negative resolution procedure has been made under section 55A VATA to make taxable persons receiving supplies of renewable energy certificates liable to account for the VAT due on those supplies. The SI came into effect on 14 June 2019.

The impact

This is an anti-fraud measure which removes the opportunity for fraudsters to charge VAT and then go missing before paying it over to the Exchequer in Missing Trader Intra-Community (MTIC) VAT fraud.

HAMMAD BAIG © 2019

BARRISTER

33 BEDFORD ROW

Hammad practices tax law and commercial litigation with a specific interest in VAT and Customs and Excise Law.

Further articles on topics relating to Hammad's practice areas, can be read under his Insights, and on Hammad’s blog. Should you wish to instruct Hammad, then please do not hesitate to contact his clerk Mark Byrne. 

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.