HC Deb 28 April 1982 vol 22 cc937-48

10 pm

The Minister of State, Treasury (Mr. John Wakeham)

I beg to move, That the Value Added Tax (Finance) Order 1982 (S.I., 1982, No. 476), a copy of which was laid before this House on 31st March, be approved. This order, which came into effect on 1 April, removes the exemption from value added tax for gold coins which are legal tender in their country of issue when supplied as collectors' pieces or as investment articles. The order is intended to counter a particular type of fraud and it may be sensible to begin by explaining how the fraud worked.

The fraud was based on the fact that gold coin was not liable for VAT but gold bullion was. The fraud was to buy large quantities of gold coins, melt them down and cast them into gold bullion. The gold bullion was then sold through secondary dealers, eventually to reach the London market or gold jewellery manufacturers. One of the secondary dealers in this chain, although registered for VAT, would be in league with the villains and would abscond with the VAT he collected from his customer. The purchaser of the bullion could reclaim the VAT he had paid as input tax and thus the only and substantial loser was the Exchequer.

The Customs and Excise is to be congratulated on its detection of the fraud. In five frauds of this type where charges have been laid the loss of VAT is estimated to have been £23½ million and some 19 persons are awaiting trial. This type of detection work is highly skilled and very labour-intensive, and action had to be taken to shut off the source of the fraud. The potential amount at stake was enormous.

The effect of the order now before the House is to amend note (2) to group 5 (Finance) of schedule 5 to the Finance Act 1972 by removing the words: other than a gold coin which is legal tender in its place of issue. The order came into effect on 1 April, the day after it was laid. Obviously once it was announced that action was to be taken, such speed was necessary. It means that, providing the House approves the continuation of the order, gold coins which are legal tender in their place of issue—the krugerrand, the maple leaf and the sovereign—will be liable to VAT when supplied as collectors' pieces or as investment articles. The sovereign will still he exempt from VAT in the rather improbable circumstances of its being used as legal tender at its face value.

The fraud made use of the fact that gold coin was not liable to VAT while gold bullion was. Removing this differential has put an end to the fraud.

There is another type of fraud involving gold which has been detected and dealt with in recent months. Charges have been made in cases involving some £17½ million of lost VAT. While this type of fraud is not covered by the order presently before the House, the necessary changes in practice to stop the fraud were taken administratively, I think the House would appreciate it if I were to take this opportunity to mention it as well.

The fraud was to import gold bullion which was, of course, liable to VAT. Then, making use of the postponed accounting system which allows a registered trader to postpone the VAT due on importation until his next quarterly return is due, the traders did not pay the VAT at the time of importation. On selling the gold bullion they were able to abscond without paying over the VAT.

In making gold coins liable to VAT we should have widened the field for that sort of fraud. However, the Customs and Excise have restricted the use of the postponed accounting system for importations of gold so that tax is now generally payable at the time of importation.

So as not adversely to affect bona fide traders, members of the London gold market are still permitted to postpone paying VAT as before. Also, consignments not exceeding £50,000 in value remain unaffected, so as to allow genuine importations by gold dealers. Antique coins and the importation of gold, including gold coins, by the Bank of England and other central banks are not chargeable to VAT on importation.

I am sure that there will be general agreement that the opportunity to commit the frauds had to be stopped. The total loss of VAT in all the gold frauds is considerable.

I should like to deal with a number of misunderstandings that have arisen over the order. First, it has been suggested that instead of putting VAT on gold coins we could have removed it from gold bullion. It would cost a substantial amount to exempt gold bullion from VAT, and more deserving claims for exemption are being pressed upon by my right hon. and learned Friend the Chancellor of the Exchequer. That would also have been in contravention of the European Community's sixth directive.

Secondly, it is said that if we had to put VAT on gold coins we should still have made an exception for the sovereign. As the sovereign when used as current coinage at face value is exempt, and will continue to be, such discriminatory action would almost certainly contravene the basic provisions of the sixth directive and could not be defended. All the other EEC countries, except Luxembourg, already charge VAT on the gold coins covered by the order, and it is likely that our practice of exempting them would have become more and mare difficult to sustain.

Thirdly, it has been suggested that it is a breach of principle to impose VAT on legal tender gold coins sold as collectors' items or as investment articles. In fact, the reverse is true. VAT has applied to non-gold legal tender coins supplied as collectors' pieces or investment articles—the silver crown, for example—for the past four years, so it is gold coins that have been the exception.

The order will not affect the status of the sovereign as legal tender. It is defined as legal tender in the United Kingdom by section 2 of the Coinage Act 1971.

The effect of the order on the sale of gold sovereigns should not be exaggerated. The bulk of sovereign sales is overseas, and exported sovereigns will continue to be zero-rated. There will be no change in the competitive position of the sovereign against other legal tender gold coins, such as the krugerrand. The tax will not bite on supplies made to registered VAT traders, because they can recover the VAT as input tax.

There may be an initial impact on purchases by private United Kingdom residents from VAT registered traders, but they will realise that in due course they will be able to command a higher selling price than at present.

The experience of other countries, such as Germany, which imposed a comparable tax a few years ago, is worth noting. It is reported that after an initial decline sales of gold and coins in that country are rising steadily.

Mr. Anthony Nelson (Chichester)

My understanding is that a person who is a private holder of such gold coins at present will probably do his best to sell them privately rather than through a registered dealer, in the hope not of securing the full price plus the VAT element, but of obtaining a partial element of that. I do not see how that will change substantially in the future, except when one buys a gold coin on which one has had to pay VAT. Surely, this will drive many dealings underground and make them unofficial. Therefore, there might be the prospect of more fraud in transactions in gold coins in the future.

Mr. Wakeham

I do not think so. The private collector who sells his coin privately is not in a different position. The problem was about those who were collecting back VAT as dealers. They were perpetrating the fraud. The private collector is not affected except that he must now pay VAT when he buys coins. As a consequence, one would expect the price of coins to rise slightly.

Mr. Nelson

I apologise to my hon. Friend for intervening again. Perhaps I am misunderstanding the position. I would appreciate some clarification. If, for example, I own a maple leaf coin or a krugerrand I understand that the sterling middle market value of that coin is about £203 or £204. As I understand it, that is the ex-VAT price. And therefore, if I pay VAT on that coin, I would pay about £235 for it. If I own such a coin and, as a private holder, I sell it, I understand that I will get not £235 but £203. I will get the ex-VAT value because the person buying it, the trader, must pay VAT. Is that correct? Will I get £203 or £235? If I get £203, surely my point is valid—private holders will be encouraged to deal under the counter and not through registered dealers.

Mr. Wakeham

I do not think so. A private holder, whether he sells privately to another private holder or to a registered trader will not have to account for VAT on the coin. In the United Kingdom, the price that the private holder will get will increase slightly because anyone buying from a registered trader must pay VAT on his purchase. The price will rise slightly in the market, but it will not necessarily increase substantially the quantity of trading that is done privately or through registered traders.

I understand the anxiety that has been expressed by a number of people about the changes. By and large when people understand the quantity of the frauds the options that were open to the Government, most will recognise that the Government had no choice.

I therefore commend the order to the House.

10.12 pm
Mr. Robert Sheldon (Ashton-under-Lyne)

I understand that the Economic Secretary to the Treasury is not too well and that is why the Minister of State is dealing with this matter. The hon. Gentleman comprehended much of an extremely difficult subject in a short time.

Twenty years ago it would have seemed incomprehensible that there would be a debate on gold coins as legal tender. All monetary opinion has been strongly against it for many years. It has been in favour of a paper currency whereby amounts could be regulated at will to adjust to expanding world trade for liquidity needs. The explosion in world trade that we witnessed in the 1950s and 1960s produced problems for those who were concerned about the amount that would be required to finance such trade. The creation of special drawing rights was one of the ways in which that explosion in world trade could be financed.

My right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) played a leading part when he was Chancellor of the Exchequer. The scheme was that the special drawing rights would go hand in hand with demonetisation of gold. It was thought that only the cranks stood against that, especially President de Gaulle who was advised by that arch-priest of gold, Dr. Rueff himself. In his messianic fervour, in his seventeenth century office in Paris overlooking the Seine, he explained to four young Members of Parliament how gold was perfect and immutable. We stood transfixed by the man who had caused international consternation by his addiction to gold in his early bureaucratic days in the 1930s.

It was earlier than that, in 1926, when Winston Churchill brought Britain back to the gold standard. That decision had appalling consequences for our economy and the unemployment which followed. That formed the precursor of the wretched 1930s. It was Lord Kaldor, much to his credit, who, many years later, persuaded the Treasury to reveal the papers and documents and to accept the blame for the bad advice tendered to Winston Churchill, against which Winston Churchill's proper instincts fought one of his few unsuccessful engagements.

I return to the mystic who, on the return of de Gaulle, persuaded him of the magic properties of gold and brought French gold holdings from 21 million ounces in 1958 to 149 million ounces in 1967. It was one of the greatest financial coups of modern times and a spectacularly successful move which brought in a profit of perhaps $40 billion to the French Government. There should be a statue to Rueff in Paris. Anyone who can bring a country $40 billion deserves such a tribute.

It should be remembered that it was largely British gold that was being bought by France between 1958 and 1966. Throughout all Administrations, United Kingdom gold continued to be sold-20 million ounces by the Macmillan and Douglas-Home Governments, 20 million ounces by the 1964–70 Governments and 20 million ounces by the 1970–74 Governments—at a cost of perhaps $20 billion to the British Exchequer. That is the extent to which we got the gold situation wrong.

Even now we have not had a proper explanation of why that happened under those Governments. Why were they so sure that they were right? The acceptance of SDRs, like any money, is a matter of trust or confidence, but the acceptance of gold coinage is something of a confidence trick, too. It depends upon a general acceptance of the value that the metal has in the hearts and minds of men, not the useful employment of it in the way in which base materials such as iron and lead can be used. Indeed, as we know, even the precious metal, silver, has important industrial applications. The acceptance of gold, like the acceptance of paper, is based on a confidence trick that it will retain its value. The advantage of gold, however, is that it has been around for a few thousand years and it is a trick that lasts rather better the longer it has been sustained.

There was a flurry of excitement on the gold market in the late 1960s, when the United States was considering demonetising gold and not, as had been its practice since 1935, buying all gold offered to it at $35 per ounce, which had established the floor. There was also interest in not advancing the economies of the USSR and South Africa which depended so much on it for their own gold production. It was thought at that time that the United States, then at the peak of its international financial power, might indeed demonetise gold. Some people believed that if that happened the price of gold might collapse. Many, however, including myself, did not hold that view, perhaps because 3,000 years of recorded history meant more to us than to others, although I hoped that the predominance of gold might abate.

Following the Smithsonian agreement in 1972, the price of gold rose. Its subsequent continued rise and later violent fluctuations are the background to the debate.

Eventually, of course, wiser and better institutions and men will relegate this metal to its ultimate place in our society as an attractive metal of limited use. Meanwhile, it is certain that its present role will continue. As a consequence of inflation and the failure of SDRs to take over the role of gold, the buying and hoarding of gold has spread to a larger public. Krugerrands, maple leafs, and our own sovereigns were until the order was laid, being bought and sold widely.

The order now places VAT on gold coins which are legal tender. That will not end the trade in gold coins, but far fewer people will be prepared to pay 15 per cent. VAT, as the hon. Member for Chichester (Mr. Nelson) realised. However, one can still invest in gold without having to pay VAT. It is simple to go overseas with pound notes stuffed in one's suitcase, purchase gold coins and deposit them in a convenient vault abroad. One does not even need to go overseas. Some companies will buy the gold in those markets and hold it for the purchaser. There is no payment of VAT, so, without the physical presence of the gold, which is not an essential part of the transaction—except for those who like to handle gold, which does not cover many of those concerned—the speculative trade is likely to continue with the large investors or speculators. It may also harm our gold futures market.

The Minister of State said that imported gold bullion will have value added tax charged to it at the time of importation. That is the only example of VAT being payable at the time of importation. That is rather special treatment. I am not against it, but I should be grateful if the hon. Gentleman can tell me, either now or later, whether this unique aspect of the order is correct. The limit of £50,000 was presumably chosen to reflect the large number of purchases of gold for normal industrial uses. Perhaps the hon. Gentleman will confirm that.

The gold futures market has opened in recent weeks. The most important question is what effect this statutory instrument will have upon it, either directly or indirectly. I see no direct connection, but there may be one, and I should be grateful if the Under-Secretary of State will assure me that he has examined the matter.

I understand that the Bank of England has been purchasing gold during the past 12 months and that it has been paying a higher price than the current market price. The Under-Secretary of State cannot go into details, for reasons that are well known, but perhaps he will say something about the general policy of the Bank of England when purchasing gold.

What is the position relating to antique gold coins? Is it the same as collector's items? Perhaps the hon. Gentleman will clarify that.

I am not sure that I fully comprehend the question of the place of issue of the coins. Krugerrands are produced in South Africa, maple leaf coins are produced in Canada, and Britain now produces sovereigns on a commercial basis. Perhaps the hon. Gentleman will distinguish between the places of issue of those three coins. Will he also tell us something about the sums that have been lost to the Revenue as a result of fraud? Substantial sums have been mentioned in this connection. Can he give us a more precise figure so that we know the scale of the operation that we are trying to control?

Finally, I wish to ask the Under-Secretary of State about the prevention of future frauds. Gold has two characteristics—a high value and a ready portability. As abuses are so profitable, we cannot be sure that fraud has been stopped completely. The very fact that the hon. Gentleman made a further statement suggests that he is worried about the possibility of fraud in future.

What is the likelihood of large-scale smuggling operations? The high value and easy portability of gold coins is closely connected with the ease and ability to smuggle them into the country.

10.25 pm
Mr. John Wheeler (Paddington)

I shall detain the House for only a few moments. I entirely support the order. I am convinced, with my hon. Friend the Minister of State, that there is a genuine need for the order and that a substantial fraud was being committed with large sums of money involved. I congratulate the Customs and Excise on its work and diligence in dealing with this matter so expeditiously.

My initial anxiety when I first learnt of the order was as to the principle of establishing value added tax on legal tender gold coins. The British gold sovereign has been an esteemed trade coin since 1817 when it was first minted in its present size and form. I was greatly perturbed to learn that we were to create an unwelcome precedent by establishing VAT on coins that are protected by the Coinage Acts and are regarded as legal tender coins of the British realm.

However, I am grateful for the fact that my many inquiries were satisfied by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne). My hon. Friend the Member for Maldon (Mr. Wakeham) also satisfied me on a number of points in his opening speech.

The trade in gold coins is important and in recent years gold coins have increased in popularity in the Western world, beginning, perhaps, with the gold krugerrand—said to be an ounce of 24 carat gold—that was first struck and made available in the late 1960s. Other gold bullion coins followed. More recently the Canadian gold maple has been struck, also in 24 carat soft gold. Australia followed with a $200 gold piece.

The difficulty with fraud is that it is possible to melt down some of the coins and turn them into bullion. This increases the profits of those who wish to take advantage of the situation. The sovereign, however, is 22 carat and less likely to be melted down. I concede that it is not a circulating coin and with a face value of £1 it is really a bullion coin. I concede also that the specimen silver coins, the 25p crown pieces currently struck by the Royal Mint, are collectors' items and are not circulating coins.

However, I am glad of the assurance that if the United Kingdom issues circulating currency coins of gold or silver, not worth more in bullion terms than the face value of the coin, they will be exempt from VAT. I accept that no great harm has been done to the principle of protecting the status of United Kingdom currency coins, or legal tender coins, and I therefore welcome the order.

I am grateful to my hon. Friend the Member for Maldon for his remarks. I am grateful, too, to my hon. Friend the Member for Knutsford for the manner in which he has dealt with my correspondence in the matter. My hon. Friend knows of my interest. He was good enough to tell me at an early stage about the proposed order. That was extremely courteous. It meant that I was able to explore points of concern on behalf of others and myself and to resolve them to my satisfaction. I support the order.

10.30 pm
Mr. Anthony Nelson (Chichester)

I do not intend to detain the House for long. I should like, however, to echo the comments of my hon. Friend the Member for Paddington (Mr. Wheeler) in his tribute to the Customs and Excise for its uncovering of the fraudulent melting down of gold coins and their subsequent sale as VAT-added bullion. Undoubtedly, this problem was of such magnitude that my hon. Friend the Minister felt that the Government had to take action. I understand fully his reasons for introducing the order. I wish to make this plain to my hon. Friend and the House before expressing a note of reservation about the move that has been made and the manner in which it has been done.

The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) mentioned, perhaps more out of interest than relevance, the enormous aggregation of gold that the French Government have made over many decades. I share his admiration for that judgment and for the manner in which French Governments have successively sought to place gold in the forefront of the international monetary exchange system. Even in discussions about special drawing rights and other media of international exchange, they have always sought to pursue their national interest by raising the price of gold. Both the market movement of this bullion and the way in which its ownership has become much more diverse and valued in recent years have assisted them enormously. It has been one of the great investment success stories of central Governments in recent years.

Not only central Governments but also private individuals, notably in the Middle and Far East, have for many years stored gold themselves mainly in the form of gold fillings to pay for their funerals but also in the form of jewellery as heirlooms. This has been to their advantage.

There are two remarkable things about gold. The first is that there is so little of it. I understand that, if one was to take an area the size of a football pitch 18 inches high, all the gold that has ever been mined in the world would not fill it. That is the equivalent of about 1¾ houses of normal three bedroom size. All the pure gold in the world would not fill them. That gives some conception of the amount that is in circulation.

The second feature is more astounding. An enormous amount of energy and capital, over centuries, has been employed in mining and digging this element mineral out of the ground simply to refine it, fashion it into a coin or a bar and to sell it to someone, often in the form of a coin—the krugerrand is an example—only for people who own such coins to dig a hole in the garden and hide them. It is a circular system of events in which people mine gold, refine it, sell it to each other and then hide it back in the ground. This employs large numbers of people and accounts for a large part of the capitalisation of the London Stock Exchange. It is an extraordinary phenomenon.

I do not, however, wish to exceed the irrelevance of the remarks of the right hon. Member for Ashton-under-Lyne. I wish to make what I hope will be seen as a couple of more substantive points. I have heard some concern expressed about the extent to which established coin and metal traders may set up agency systems whereby they offer to put purchasers of gold coins in touch with sellers of gold coins in return for a commission rather than acting as brokers themselves and attracting a liability to place a VAT element on the sales that they make; that is to say, if I am an established bullion dealer whose turnover exceeds the VAT threshold, under the new order I shall, if somebody wants to buy a gold coin, have to sell it to him and pay the VAT price.

However, it may now be possible that a number of these dealers, of both substantial and medium sizes, may act not as brokers but as introductory agents and simply take a commission. As the resultant transaction is between two individuals, and a commission is taken, it is not liable to VAT. Therefore, to a large extent the purpose of the order may be circumvented. I am not saying that it will necessarily result in fraud, which my right hon. Friend the Minister of State has sought to overcome, but it will have the effect of being injurious to the established metal market dealers in London, and those who deal in coins.

Mr. Jim Craigen (Glasgow, Maryhill)

Is the hon. Gentleman telling the House that there is a loophole in the order already, before it is passed?

Mr. Nelson

I do not know whether "loophole" is quite the right word, but the right hon. Member for Ashton-under-Lyne has already referred to a number of ways in which people can overcome the order.

For example, one of the ways is by going abroad, as people are freely able to do with their capital, and buy gold bullion and coins without having to pay VAT. They can establish a deposit for such gold coins in a foreign bank. If somebody wants to buy a substantial amount of gold, they would be foolish to do it through the London market and pay VAT. They will do it through the Swiss market, or through the Italian market, where gold is at its cheapest.

My concern is genuine. I am worried that what we may be doing will be to the substantial detriment of the London gold market, with all the pre-eminence that that brings for us, and all the deposits and funds that pass through Britain. By passing the order we may not have quite the effect that we hope for. People will still be able to purchase gold abroad without having paid VAT. If fraudulent devices continue it is possible that the gold may be imported, however illegally, and melted down to be sold as VAT-bearing bullion.

I do not know what will happen, but I doubt whether the measure will have a substantial effect on those who are determined to commit fraud of this type. I fear that it may have an injurious effect on the London coin market.

I understand the real and practical problems about consulting with the market and the dealers before such changes are introduced. However, there has been much criticism from those involved in this business. It has been said that had the Government sought informally, or by other means, to discuss the way in which this might be done, a number of alternatives or refinements might have been put forward by the market.

I should welcome my hon. Friend's comments to reassure those involved and other important sectors of the City of London that deal in commodities that changes of this kind are not introduced peremptorily but are done after the utmost thought and with a proper procedure of consultation.

10.39 pm
Mr. Wakeham

I am grateful to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for his kind remarks. Perhaps I should have expressed the apologies of my hon. Friend the Economic Secretary to the Treasury, who has been in hospital and had an operation. He is getting better. Although he is not here, he would have liked to have been.

I enjoyed the right hon. Gentleman's speech. He used the wide sweep of history with facility and charm. I had my pencil poised, but it was some moments after he began before we reached the VAT era. When we did so, the questions came thick and fast and I shall do my best to answer them, as I shall the questions raised by my hon. Friends the Members for Paddington (Mr. Wheeler) and Chichester (Mr. Nelson). I am grateful to them for their remarks.

I confirm what I hope I made clear in my speech, that legal tender, when used as current coinage at its face value, is free of VAT, was free before and will continue to be so.

I shall consider the points made by my hon. Friend the Member for Chichester about consultation. I am sure that he would agree that in this area, dealing with massive sums of money and fraud, it is extremely difficult for the Customs and Excise to do much in the way of consultation with outside bodies before the Government made the decision. We consulted where it was possible with, for example, the Bank of England. Certainly the trade was told as soon as we made the decision. I shall consider whether the Government can do anything further in a similar operation, but I am bound to say that I think that that would be extremely difficult.

My hon. Friend said that there might be a loophole where agents are involved. If the transaction is carried out by' properly registered agents, on the face of it, it would seem that VAT payable would be on the agency commission and not on the coinage, as he suggested. That type of loophole is easy to exaggerate. I do not believe that that sort of transaction is likely to happen a great deal. It might happen to some degree.

The total value of VAT lost in frauds with which the order deals, and the fraud on the importation of gold bullion which was dealth with administratively, where persons have been detected and charged, amounts to about £40 million. That is a massive sum. We are fairly certain—in the nature of such things one cannot be absolutely certain—that we have stopped such frauds. The logic would be that we have done so.

Mr. Robert Sheldon

Can the hon. Gentleman say how much of that sum is likely to be recovered?

Mr. Wakeham

No; I must choose my words carefully. The cases are sub judice and I should not say anything more about that at the moment. Further investigations are being carried out, and past Customs and Excise cases will be dealt with.

Mr. Craigen

The hon. Gentleman seems to be suggesting that the figure could be considerably higher. We spent most of Monday afternoon here talking about giving back £60 million in unemployment benefit. The Government gave all sorts of reasons why the £60 million was not available to reimburse the 5 per cent cut in unemployment benefit.

Mr. Wakeham

I was not saying anything of the sort. The considerable amounts of money defrauded from the Inland Revenue or the Customs and Excise do not present additional sums to deal with the many other calls on our public purse. The Customs and Excise authorities dealt with the matter as soon as it came to light. They are to be congratulated and not condemned for the action that they have taken. One regrets that it happened, but it is not a case for condemnation of the Customs and Excise.

Mr. Craigen

I am not condemning the Customs and Excise.

Mr. Wakeham

It has been suggested that the trade in gold coins will be driven to overseas countries where VAT does not apply. In many European countries VAT applies, but part of the trade might go to Switzerland, where it does not apply. That does not concern those who live abroad, because they are zero rated if they buy in Britain. However, some people might choose to make their purchases in Switzerland. They would have to pay the insurance and storage charges, because they could not bring back coins to Britain without paying VAT on them.

The right hon. Member for Ashton-under-Lyne asked about the increased risk of smuggling. That possibility cannot be denied. However, smuggling is a hazardous adventure for those contemplating fraud and the expertise of the Customs and Excise in dealing with smugglers has been developed in the past century. The smuggler would face periods of imprisonment and the possibility of losing the entire proceeds of the venture.

The right hon. Member also asked me about the increased risk of sales of forged sovereigns in the United Kingdom. For some time, coin dealers have introduced measures to protect their customers and collectors would be well advised to exercise caution when purchasing alleged VAT-free bargains from individuals whom they do not know. It is debatable whether forgers will increase their activities simply as a result of the VAT changes.

The right hon. Member also mentioned gold holdings. The statistics for the holdings of gold in the exchange equalisation account and the gold and dollar reserves are published regularly. I refer the right hon. Gentleman to them, although he has no doubt studied them. It is not the practice to reveal more details than those published. However, it would hardly be surprising if the Bank of England purchased gold in the market from time to time to replace the gold sold in the form of sovereigns. Dealings in the gold futures market are for options, and are therefore not liable for VAT or covered by the order.

The opening of the new market is a further example of the City's health as an international financial centre, bringing valuable invisible earnings to the nation.

The right hon. Member also asked about antique gold coins. VAT is not chargeable on the importation of antique coins. Supplies of antique coins by a taxable person are eligible to be dealt with under the special scheme for second-hand goods. Subject to certain conditions being met by the trader, tax is charged only on the margin—the difference between the buying and selling prices.

I turn to the credit arrangements for handing over the VAT on importation.

VAT is charged on the importation of all goods liable at the standard rate when supplied in the United Kingdom. However, a registered trader can postpone his liability to account for the tax until he makes his next quarterly return. The Commissioners of Customs and Excise have restricted the general use of the postponed accounting system only for gold, because this is the only commodity for which they have evidence that the system has failed as a result of substantial fraud.

In some cases, the commissioners have restricted the credit facilities in the case of individual traders who have not carried out their obligations to make proper returns. I should point out that the postponed accounting system is not technically a credit facility, and I confirm that this is the first time that anything has been done for a general class of trader as opposed to individual traders.

Question put and agreed to.

Resolved, That the Value Added Tax (Finance) Order 1982 (S.I., 1982, No. 476), a copy of which was laid before this House on 31st March, be approved.