VAT-Free anomaly

Jo_RB

Anyone else annoyed every time one of those adverts for gold bullion comes on and reminds us that there’s no VAT on gold purchases! Why, when essentials are liable to VAT?!

jon81uk

Because gold is basically currency, same as there wouldn't be VAT on coins.
Once they turn it into jewelry then value has been added and VAT will be due.

Ectophile

Buying gold bullion (bars and coins) is considered investment, not buying luxury goods. You don't pay VAT on a stocks & shares ISA either.

[Deleted User]

Ectophile said:

Buying gold bullion (bars and coins) is considered investment, not buying luxury goods. You don't pay VAT on a stocks & shares ISA either.

Yet silver bars and coins, from the same dealers as for the gold items, DO carry VAT.  Perish the thought that folk who can't afford to spend as much on such things have to pay the full 20% VAT, while the wealthier customers don't.

Strikes me that the position is both illogical and unfair.  Funny old world.

WR

neilmcl

Well this is something you can actually blame on the EU.

Before 2000 gold sales were indeed subject to VAT but due to a number of EU countries not charging VAT on gold the UK was put at a disadvantage and therefore we had to remove the VAT element to close this disparity. Don't forget it's not just individuals that trade in gold but governments too.

neilmcl

Ectophile said:

Buying gold bullion (bars and coins) is considered investment, not buying luxury goods. You don't pay VAT on a stocks & shares ISA either.

Whether they're considered an investment is not relevant. Stocks and shares are not subject to VAT because they're not physical goods or services but there are plenty of goods that are traded/invested every day that are subject to VAT. The only consideration gold has as an investment is that it's not subject to CGT.

George_Michael

neilmcl said:

Whether they're considered an investment is not relevant. Stocks and shares are not subject to VAT because they're not physical goods or services but there are plenty of goods that are traded/invested every day that are subject to VAT. The only consideration gold has as an investment is that it's not subject to CGT.

The majority of gold coins and all gold bullion bars are subject to CGT.
The only exemption is coins that are classed as UK legal tender which are Sovereigns and Britannias.

[Deleted User]

George_Michael said:

neilmcl said:

Whether they're considered an investment is not relevant. Stocks and shares are not subject to VAT because they're not physical goods or services but there are plenty of goods that are traded/invested every day that are subject to VAT. The only consideration gold has as an investment is that it's not subject to CGT.

The majority of gold coins and all gold bullion bars are subject to CGT.
The only exemption is coins that are classed as UK legal tender which are Sovereigns and Britannias.

Yet silver Britannias DO carry VAT.  Gold no, silver yes.

WR

George_Michael

Wild_Rover said:

George_Michael said:

neilmcl said:

Whether they're considered an investment is not relevant. Stocks and shares are not subject to VAT because they're not physical goods or services but there are plenty of goods that are traded/invested every day that are subject to VAT. The only consideration gold has as an investment is that it's not subject to CGT.

The majority of gold coins and all gold bullion bars are subject to CGT.
The only exemption is coins that are classed as UK legal tender which are Sovereigns and Britannias.

Yet silver Britannias DO carry VAT.  Gold no, silver yes.

WR

VAT is quite complicated when applied to gold coins.

The VAT exemption only applies to what is called "investment gold" and doesn't apply to silver in any form.
Gold Britannias and Sovereigns don't have VAT on them ( nor do a great many other gold coins) provided that they are classed as bullion gold. If a one ounce coin is sold for about £1400 (at today's prices) the  it is VAT free as you are really only buying the coin for its gold value.
If however it's a  rare coin sought after by collectors and its value is more than 180% of the intrinsic gold it contains, it may cease to be investment gold and becomes liable for VAT.

Ectophile

VAT doesn't make sense.  It has all sorts of strange loopholes and grey areas.  Hence the arguments over Greggs pasties* and McVities Jaffa Cakes**.

* Greggs pasties are not hot food, even if they are hot.  It's because they have just come out of the oven and haven't cooled down yet.  If they were put back into the oven to re-heat, then they would be hot food.

** Jaffa cakes are cakes, not biscuits.  So there's no VAT on them.  It took a court case to decide that.

Sandtree

Ectophile said:

** Jaffa cakes are cakes, not biscuits.  So there's no VAT on them.  It took a court case to decide that.

Technically there is VAT but its 0% as an essential item, had they been deemed chocolate covered biscuits then they'd be a non-essential item and so attract 20% VAT. One of the critical points in the decision was the fact that when they go stale they get hard (like a cake) whereas a biscuit typically gets soft when stale. 

Whilst the end result to consumers are the same if an item is 0% VAT or VAT Exempt there is a big difference to the company selling the items... if its zero rated VAT on ingredients etc can be recovered whereas if its VAT exempt then VAT cannot be recovered on ingredients etc.