Reduced rate of VAT on Energy Saving Materials
Currently in the UK, VAT is charged at 5 % on the supply and installation of certain energy saving materials in residential buildings. These include insulation, draught stripping and solar panels.
The Court of Justice of the European Union (CJEU) delivered its Judgment on this matter on Thursday 4 June 2015 and the UK has lost the argument.
The UK changed the law in Finance Act 2013 and withdrew the reduced rate for energy saving materials installed in buildings used solely for a relevant charitable purpose. However, the UK decided to defend the remainder of the reduced rate. As the judgement has gone against the UK, it is not clear whether the relief will have to be withdrawn entirely or if a ‘new version’ will appear and apply only to those in ‘social need’. The UK may choose to implement some form of certification so that the 5% only applies to specific categories of recipients or possibly through some form of means testing or registration akin to the Motability Scheme which operates in the UK car market. We await HMRC’s response with interest.
See link to decision here