Exemption ― finance ― financial derivatives

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

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. 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 Liability - financial intermediaries and brokers 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.

Futures contracts

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 are those traded on financial services such as currencies, interest rates and securities rather than an underlying raw material such

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