From 1 September 2024, the sale of voluntary carbon credits will be standard rated for VAT purposes if the place of supply is the UK. Revenue and Customs Brief: VAT treatment of voluntary carbon credits (VCCs) sets this out in change in treatment in more detail.
VCCs are tradable certificates that verify the reduction or removal of one metric tonne of carbon dioxide (or equivalent greenhouse gases) from the atmosphere. These differ from compliance market credits which are used within regulated emissions trading schemes.
This change in treatment reflects HMRC’s changed view that a secondary market for VCCs has emerged, and that businesses now incorporate VCCs into onward supplies.
As a result, from 1 September 2024, the sale of most VCCs will be treated as a taxable supply for VAT at the standard rate, if the place of supply is the UK. However, certain VCCs activities will continue to fall outside the scope of VAT. More detail is available in the Brief, and in the relevant HMRC manual.
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