No: CE 12                                            28 November 1995

                           BUDGET 1995 : VAT

                      CHANGES TO REDUCE GOLD FRAUD


The Chancellor announced that from 29 November 1995 the special 
anti-fraud scheme for charging VAT on gold will be extended to cover 
all gold grain irrespective of its purity or price.  Up to now, only 
fine gold, gold coins and goods sold for the value of the fine gold 
which they contain have been included in the scheme. This has lead to 
some fraudsters misdescribing fine gold (within the scheme) as gold 
grain of less than 24 carat (currently outside the scheme), charging 
VAT and absconding with the VAT which they should have paid to 
Customs and Excise.  (Gold grain resembles fine pebbles about 3 
millimetres in diameter.  It is normally supplied as an alloy of 
either 9, 18 or 22 carats and is used in jewellery manufacture).


NOTES FOR EDITORS

1.     Normally, a VAT registered business supplying taxable goods 
or services charges VAT to the purchaser and accounts for this as 
"output tax" on a VAT return. Where the buyer uses the goods or 
services for the purposes of making taxable business supplies he can 
recover the VAT charged as "input tax".

2.     The special accounting scheme for gold applies only to sales 
between VAT registered traders and is designed to counter a 
particular type of fraud - under which a person would sell gold, 
charge his customer VAT on the sale and then disappear without 
paying to Customs the tax which had been charged. The buyer would 
still be able to recover the VAT charged to him as "input tax", 
hence there would be a tax loss. The special scheme was introduced 
to prevent this practice, and became compulsory in 1993.

3.     Under the special scheme, the buyer does not pay the VAT on a 
supply of gold to the seller, but, instead, accounts for it to 
Customs and Excise. The buyer's right to treat the VAT as input tax 
is not affected.

4.     To date, the scheme has been confined to 24 carat gold, gold 
coins and goods sold for their gold content and priced accordingly 
(scrap gold jewellery, for example). However, this has led to some 
fraudsters misdescribing fine gold (which is subject to the special 
scheme) as gold grain of a caratage lower than 24 carat (which is 
outside the scheme) - and then charging VAT and absconding with it. 
To counter this fraud, the Chancellor proposes to extend the scheme 
to cover all gold grain irrespective of purity or price.

5.     The estimated revenue yield from this measure is 5 million 
Pounds a year from 1996-97 onwards.

6.     A Compliance Cost Assessment (reference CCA 3/95) is 
available, copies of which can be obtained from David Lonsdale, 
CDG, 8th floor C, HM Customs and Excise, New King's Beam House, 
22 Upper Ground, London SE1 9PJ (Tel No: 0171-865-5570).

7.     Details for traders are available in Budget notice BN 126/95.




ISSUED BY:   HM CUSTOMS AND EXCISE,
             PRESS AND INFORMATION OFFICE,
             NEW KING'S BEAM HOUSE,
             22 UPPER GROUND, 
             LONDON, SE1 9PJ

TELEPHONE:   0171 865 5468/5470/5471

FAX:         0171 865 5625