Important changes to renewable energy certificates rules

HM Revenue & Customs has cracked down on criminal gangs who are targeting the renewable energy industry in the latest wave of sophisticated VAT scams … writes David Robertson, Senior Associate.

The emergency action came into effect without notice last month to avoid tipping off the fraudsters who have been blamed for draining billions of euros from the EU every year.

It is understood that the criminals are charging VAT on the sale of renewable energy “certificates of origin” which they siphon off rather than pass on to the taxman.

In a nutshell, it means that from June 14 renewable energy businesses should not charge VAT on the sale of renewable energy certificates.

The list of certificates includes amongst others: Renewable Energy Certificates (RECS), Renewable Obligation Certificates (ROCS) and Renewable Energy Guarantee of Origin (REGO).

A domestic reverse charge has been introduced so that purchasers of the certificates will have to account for VAT on the supply where the transaction is between VAT registered businesses in the UK. The purchaser will, however, deduct the VAT due as input tax meaning there will be no net tax payable.

The new rule was published on June 13, 2019 via Revenue and Customs Brief 4 (2019): VAT, for implementation the following day.

Sellers of certificates need to amend the layout of their invoices making it clear that the amount of VAT due under the reverse charge is clearly stated and should be accounted for by the purchaser.

The sale value of the certificates should be included in box 6 of the seller’s VAT return, but the VAT due under the reverse charge should not be included in box 1.

 *David Robertson runs Bell Ingram’s client accounting department looking after the financial affairs of a wide variety of private and commercial clients with interests as diverse as estates, farms, fishings, forestry, hotels and pipelines. For more information about this or any other tax issue he can be contacted at david.robertson@bellingram.co.uk or on 01738 621 121.

Published on 9th July 2019