The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
Derivatives are financial instruments whose value is based on the value of the underlying commodity, financial instrument or currency. In order to determine the correct VAT liability of a derivative the business or its adviser will need to ascertain the nature of the underlying supply and its associated VAT treatment. This guidance note provides information on the VAT treatment of the derivative and not the actual underlying product. If the business is acting as an agent or intermediary involved in these types of transactions, see the Exempt finance - intermediaries guidance note for more information.
If the business is dealing with commodities traded on qualifying terminal markets, see De Voil Indirect Tax Service V4.208.
A futures contract is an agreement to buy or sell a fixed amount of a particular commodity, currency or security on a specified date in the future agreed by the parties on the date the agreement was signed. Financial futures include currencies, interest rates and securities and these transactions are exempt from VAT. There are various types of future contracts and these are explained below.
In order to determine the correct VAT treatment the business or its adviser needs to have answers to the following questions:
These are contracts where there is no underlying deliverable security or contract and can therefore only be settled via
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