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Notice 701/21A

January 2000

This is a new notice and is to be read in conjunction with VAT Notice 701/21 (January 2000 edition)

• Date version agreed: January 2000
• Available from: January 2000
• Effective from: 1 January 2000

This Notice incorporates the list of gold coins published by the European Commission in the Official Journal of the European Communities (C 342/13) on 30 November 1999. The gold coins listed in this Notice are, for the year to 31 December 2000, deemed to be "investment gold" for the purposes of UK and EC law.

Do you have any comments?

We would be pleased to receive any comments or suggestions you may have about this Notice. Please write to:

VAT Communications
HM Customs and Excise
4th Floor West
New King’s Beam House
Upper Ground
LONDON SE1 9PJ

Contents
1 Introduction
1.1 What this Notice contains
1.2 Law
1.3 The legal status of this Notice
2 Investment gold coins
2.1 What is an investment gold coin?
2.2 The list of investment gold coins
2.3 Gold coins not included on the list
2.4 Coin ‘types’ and ‘normal’ selling value
2.5 The Margin Scheme
2.6 Cautionary note and observations
Appendices
1- List of investment gold coins
2- List of VAT Notices
Further help and advice
If you have a complaint

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1 Introduction

1.1 What this Notice contains

This Notice contains a list of gold coins which should be treated as investment gold coins for the purposes of the VAT exemption detailed in Group 15 of schedule 9 to the Value Added Tax Act 1994. This list has legal force and supplements the law. There are special requirements for dealers in investment gold. Further information about, liability, record keeping and notification requirements of transactions involving investment gold are to be found in Notice 701/21 Gold .

1.2 Law

The basic UK law governing VAT is the Value Added Tax Act 1994 which implements the provisions of the EC Sixth VAT Directive (77/388/EEC). Various Orders and Regulations made under the Act also affect supplies of gold. The main ones are:

• The Value Added Tax Regulations 1995
• The Value Added Tax (Investment Gold) Order 1999
• The Value Added Tax (Terminal Markets) Order 1973.

1.3 The legal status of this Notice

Generally speaking, this Notice and other VAT Notices and Leaflets explain how Customs and Excise interpret VAT law. However, sometimes the law says that the detailed rules on a particular matter will be set out in a Notice or Leaflet published by Customs and Excise rather than in a Statutory Instrument.

This notice is published by the Commissioners of Customs and Excise for the purposes of the following Orders and Regulations made under sections 31(2) and 37(1) of the Value Added Tax Act 1994 and section 13 of the Finance Act 1999.

The Value Added Tax (Investment Gold) Order 1999

The Value Added Tax (Importation of Investment Gold) Relief Order 1999.

In this respect the list in Appendix 1 has legal force and supplements the law.

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2 Investment gold coins

2.1 What is an investment gold coin?

The law exempts investment gold. This Notice deals only with investment gold coins. An investment gold coin is:

(a) a gold coin minted after 1800 that-

• is of a purity of not less than 900 thousandths,
• is, or has been, legal tender in its country of origin, and
• is of a description of coin that is normally sold at a price that does not exceed 180% of the open market value of the gold contained in the coin; or

(b) a gold coin of a description specified in Appendix 1

2.2 The list of investment gold coins

The European Commission have published a list of gold coins which must be treated as investment gold in all EC member states. The Commission’s list is reproduced in Appendix 1. The list will be updated annually. The purpose of the list is to provide business with certainty about the VAT treatment of gold coins.

All gold coins included within Appendix 1 of this Notice must be treated as investment gold for the whole year for which the list is published.

VAT Notice 701/21 Gold provides further guidance and supplements the law with regard to the operation of the special scheme for investment gold.

2.3 Gold coins not included on the list

As a general rule, coins not included in Appendix 1 will be subject to VAT at the standard rate. However, even if a coin is not on the list you may treat it as investment gold if all the criteria outlined at paragraph 2.1 (a) are met.

You must be able to show from your business records that any such coin meets the criteria.

2.4 Coin ‘types’ and ‘normal’ selling value

All the coins that meet the definition at paragraph 2.1 (b) and (c) that have the same denomination (face value), size and gold fineness, constitute a single description or type for the purpose of the law. This is a wider definition of ‘type’ and ‘description’ than is usually adopted by numismatists because changes of superficial design do not alter the gold coin type for the purposes of the exemption. Consequently, a gold coin type may be a single issue for one year, or have been produced for almost two centuries, as in the case of the British sovereign.

Of the three criteria in paragraph 2.1(b), only the selling value is subjective.

Coins are minted in various finishes and will be sold at a variety of prices. If exemption depended on the actual selling price of an individual coin this would lead to inconsistency. Administration of the exemption would become burdensome for Customs and traders alike.

For this reason, exemption depends on the ‘normal’ selling price.

By this we mean the price that can most usually be demanded for a particular type of coin. It does not matter that an individual coin is of a special interest to collectors; if the usual value of the coin type falls within 180% of the value of the gold contained therein, all coins of that type will be exempt. Similarly, if a coin type is usually valued at more than 180% of the gold value, because of its interest to collectors, but an individual coin is in such poor condition that it is worth less than 180% of its gold value, that coin (like others of its type), will be taxable and subject to normal VAT rules.

The normal selling price of coins is influenced by the finish. Investment gold coins fall into two broad classes. The first consists of relatively older issues made to circulate as currency. The second, generally more recent, were primarily produced as a store of wealth. The first will normally be worn from circulation. The second type may have been issued in a number of finishes and if the majority of a type of coin are for example ‘brilliant uncirculated’ quality then, other things being equal, the brilliant uncirculated value will reflect the normal selling price. On the other hand, if the majority of a particular coin are ‘proof’, then the value of the proof coin will more likely reflect the ‘normal’ selling price. The test of normal selling price must take into account these factors and be based on the condition in which the gold coin type is most frequently traded.

If you are unsure whether the ‘normal’ selling value falls within the 180% criterion, you should contact your local VAT office.

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2.5 The Margin Scheme

Gold coins which are investment gold (see paragraph 2.1) are not eligible to be sold under the Margin Scheme.

If gold coins which meet the definition of investment gold have been included as purchases in margin scheme stock records the entry should be closed and noted accordingly. If the coins have been included in Global Accounting purchases, the items should be removed from the scheme and an adjustment made to the total purchases in the period. In that period traders must deduct from their Global Accounting purchase records the value they have attributed to the items.

Guidance can be found in paragraph 3.11 of Notice 718 Margin scheme for second-hand goods, works of art, antiques and collectors’ items

2.6 Cautionary note and observations

The list reproduced in Appendix 1 reproduces the list of gold coins published by the EC Commission. It is the product of the representations of all EC Member States. UK Customs liaised with trade representatives in order to ensure that the UK contribution to the list was as accurate and complete as possible. However, we note that the EC Commission list appears to contain some duplications and inaccuracies. We will be making representations to the EC Commission about these entries. In particular, we understand that some of the coins on the list are not 900 thousandths pure.

Other points to note are:

FRANCE: 20 Francs. Although only 20 Francs of the year ANXI have been included on the list, UK Customs accepts that the 20 Franc coin bearing other dates also falls within the exemption for the period of the current list.

ITALY: 20 Lire. UK Customs will accept the 20 Lire gold coin qualifies as investment gold for the period of the current list

UNITED KINGDOM. The 1 Angel has been included under United Kingdom coins, it is of course an Isle of Man coin.

The 5 and 20 POUNDS Jersey have been included under the United Kingdom. These should be included under Jersey.

UNITED STATES: We are looking into the limitations to the United States list, in particular the 5 and TEN DOLLARS

The purpose of the EC list is clarity. In general terms you must treat any coin included on the list as investment gold. But, if a coin is clearly not investment gold (for example, we understand that the 2 POUNDS Britannia is a silver coin), you should not treat the coins as qualifying for exemption.

We will seek to rectify errors in time for next years list. In the meantime, if you encounter problems please contact your local VAT office.

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List of investment gold coins

(referred to in paragraph 1.3, paragraph 2.1 and paragraph 2.3)

This Appendix has legal force and supplements the law

List of gold coins qualifying as investment gold published in the Official Journal of the European Communities (1999/C 342/13) by the European Commission on 30 November 1999.

The coins listed below meet the criteria established in Article 26b(a)(ii) of Council Directive 77/388/EEC as amended by Council Directive 98/80/EC (special scheme for investment gold)

(This list is valid for the year 2000)