VAT Notice 701/21 on gold


HMRC has recently updated its VAT Notice 701/21 on gold.

This notice is relevant to all business that supply or receive gold or investment gold, explaining the difference between the two. The notice also includes the treatment of acquisitions and imports of gold or investment gold.

The changes are to reflect the updates on ‘Import and Export of investment Gold’ and the penalties section within the Notice. The updates can be found in Section 8 and 9 of the Notice, reproduced below for your reference.

Section 8: Imports and exports of investment gold

8. Imports and exports of investment gold

8.1 Imports and acquisitions

Imports and acquisitions (see section 16) of investment gold from a place outside the UK are exempt from VAT. But you must enter the transaction details on Customs Procedure Code form (CPC) 40 00 073 in order to gain the exemption.

Further information on imports and acquisitions is given in Notice 725 The Single Market and Notice 702 Imports.

8.2 Exports and despatches

The supply of investment gold which is exported to a place outside the EC or despatched to a business in another EC Member State is outside the scope of UK VAT with input tax recovered in accordance with the normal rules. You must however, keep evidence of the export or despatch. Further information is given in Notice 703 VAT: Exports and removals of goods from the United Kingdom and Notice 704 VAT Retail exports.

8.3 EC sales lists (ESLs) and Intrastat

You do not need to complete ESLs for exempt sales of investment gold to businesses established in other EC Member States. You must, however, complete any required Intrastat declaration.”

Section 9: Penalties

9. Penalties

9.1 Why are there penalties?

Gold frequently moves between the taxable (industrial) and exempt (investment) markets and can be easily transformed into taxable gold or gold products such as jewellery. We need a full audit trail in order to make sure that VAT is properly accounted for when this happens.

The notification, invoicing, and record keeping requirements described in sections 3, 6 and 7 provide this audit trail. The Finance Act 2000 introduced a penalty, chargeable when businesses (whether or not they are registered or liable to be registered for VAT) do not satisfy these requirements.

If you are assessed for this penalty it does not mean that you are suspected of involvement in a VAT fraud.

9.2 When might I be liable to a penalty?

You will only be charged a penalty if we are not satisfied that you have a reasonable excuse, see paragraph 9.6, and we may reduce the amount of the penalty if this is justified in the circumstances of the case, see paragraph 9.7.

9.3 Is there a time limit for assessing a penalty?

Yes. The penalty will not be assessed more than four years after the transaction date, or more than two years after we had sufficient facts to make the assessment.

9.4 What is the penalty?

The penalty will normally be 17.5 per cent of the value of the transactions concerned.

9.5 Best judgement

Where there is doubt about the value of the transactions, we will assess the penalty on the basis of our best judgement. We will consider all the relevant material before us, making an honest and fair estimate of the value of the transactions involved.

9.6 Reasonable excuse

We will not impose a penalty if you have a reasonable excuse for failing to comply with the requirements. Although reasonable excuse is not defined in law, we do not regard insufficient funds or reliance on information from a third party as being a reasonable excuse. Ignorance of the law would not normally constitute a reasonable excuse either, although it may be a mitigating factor, see paragraph 9.7.

We will look carefully at the individual circumstances of each case, and take into account whether or not the circumstances could be foreseen and what steps were taken to make alternative arrangements. We will also consider whether you contacted HM Revenue & Customs (HMRC) for help and advice, and whether you gave sufficient priority to meeting your obligations.

9.7 Mitigation

We, or on appeal, the VAT and Duties Tribunal may reduce the amount of the penalty taking into consideration the individual circumstances of each case. For example, we will consider the following in deciding whether a reduction of the penalty is appropriate:

• number of breaches; 

• seriousness of breaches; 

• co-operation with Customs; 

• compassionate grounds; 

• the period of time involved; 

• deliberate or reckless behaviour; 

• perceived risk to the revenue; and 

• degree of care exercised

It is your responsibility to bring to our attention any mitigating factors.

9.8 Right of appeal

If you disagree with our decision to issue a penalty, you can ask HMRC to review it. You should certainly do this if you can provide new information or you think we have not taken everything into account. This does not affect your right to appeal to the First Tier Tribunal.

You may ask us to reconsider, or appeal to the VAT and Duties Tribunal about:

• your liability to the penalty; 

• the amount of the penalty; 

• our refusal to accept you have a reasonable excuse; and 

• the amount by which we have mitigated the penalty.”

The updated VAT Notice 701/21 on gold can be accessed using the 'Related Links'.