VAT on Silver

Anyone who buys silver - whether as bars, investment coins or industrial material - generally pays Value Added Tax (VAT) in the United Kingdom. This distinguishes silver fundamentally from investment gold, which is fully exempt from VAT (HMRC guidance, in line with EU Directive 2006/112/EC). For silver investors this difference has considerable practical significance: the tax raises the entry cost and therefore the break-even point on a later sale.

Standard rate and the margin scheme

In the United Kingdom silver is subject to the standard VAT rate of 20% on the net purchase price. An example:

Net dealer price:      GBP 100.00
+ 20% VAT:            + GBP  20.00
─────────────────────────────────
Gross price (buyer):   GBP 120.00

Many dealers, however, use the VAT margin scheme. Under this scheme VAT is not levied on the entire selling price, but only on the trading margin (the difference between the dealer's buying and selling price). The scheme is open to reputable commercial resellers who have acquired the goods from private individuals or from other margin-scheme dealers. The effective tax rate for the end customer is then typically in the region of 5-10% of the gross purchase price - depending on the dealer's specific margin. The margin scheme must be shown on the invoice; a separate VAT amount may not be stated there.

Overview: silver VAT in international comparison

*In Singapore, qualifying Investment Precious Metals (including silver of at least 999 fineness) have been exempt from GST since October 2012; the standard GST rate has been 9% since January 2024.

Which silver products are affected?

The 20% VAT applies to virtually all silver products:

• Silver bars (cast or minted, any denomination)
• Investment and bullion coins in silver (e.g. Maple Leaf, Vienna Philharmonic, Britannia, American Eagle)
• Numismatic collector coins in silver (possibly under the dealer's margin scheme)
• Industrial silver (granules, semi-finished products)
• Scrap and broken silver in the commercial trade

Not subject to VAT, by contrast, is the private resale (private individuals are not taxable persons) as well as certain exempt banking transactions where silver is classed as a financial instrument - which is rare and contested in practice.

Effect on the silver price and the premium (agio)

The spot price for silver (e.g. the current silver price in GBP) is a net market price without VAT. Dealers add their premium (minting costs, margin, logistics) on top of this price and then the statutory VAT. The silver surcharges due to tax can be substantial compared with gold and feed directly into returns: anyone who buys silver and later sells it privately (private individuals sell without VAT) carries the tax paid on purchase as a permanent cost factor.

The Silver Calculator can be used to work out the current material value; the Tax Estimator helps to gauge the overall tax burden on purchase and sale.

The margin scheme in practice - what buyers need to know

1. Identifying feature on the invoice: a reference to the VAT margin scheme - no separate VAT amount is shown.
2. No input-tax recovery: businesses that use silver commercially cannot reclaim input VAT on margin-scheme invoices.
3. Price comparison: a gross price of GBP 110 (margin scheme) can be cheaper than GBP 110 under standard 20% taxation, because in the first case the tax applies only to the margin.
4. Resale: private individuals can resell margin-scheme coins tax-free (not a taxable person = no VAT liability). Any capital gain and the applicable Capital Gains Tax rules should be borne in mind.

Tax advantage: why investment gold is better positioned

Investment gold enjoys a special status because it is regarded as a money-like asset - investment gold is exempt from VAT under HMRC rules (in line with EU Directive 2006/112/EC). Silver does not enjoy this status - even though it historically also had monetary significance as a coinage metal. For the investor this means: at the same spot price, gold can offer a better net entry level because no VAT inflates the purchase price.

Note: This article does not constitute tax or investment advice. For individual tax questions please consult a tax adviser.

In brief

In the United Kingdom silver is subject to the standard VAT rate of 20%; the VAT margin scheme can significantly reduce the effective tax rate for the end customer. Unlike investment gold, silver enjoys no VAT exemption - a factor investors should always factor in when buying silver and comparing actual entry costs.