Government consults installers on lifting VAT to 20% on energy saving products
Posted by Gordon Glass on 11 December 2015 at 3:50 pm
The government has just launched a consultation related to a possible hike in VAT from 5% to 20% for a number of energy saving and renewable energy products. Any companies who supply and/or install such products into residential accommodation are invited to respond.
As we wrote back in June, the EU has warned that the UK’s low rates of VAT on energy efficiency and renewables are in breach of EU laws. The tax relief is intended for the less able to pay within the context of a social policy and the EU says this has been too widely applied.
The knock-on effect is likely to be significant additional expense on the installation cost of the following products for most UK consumers:
- controls for central heating and hot water systems
- draught insulation, e.g. around windows and doors
- insulation on walls, floors, ceilings, lofts, etc
- solar panels
- wind turbines
- water turbines
- ground-source heat pumps
- air-source heat pumps
- micro combined heat and power units
- wood-fuelled boilers
The consultation seeks views on moving to a position where the lower rate of VAT would still be available for those aged over 60 or claiming benefits, and could work to the benefit of relevant housing association tenants.
For a professionally installed measure where the cost of the product exceeds the cost of the labour involved, the proposal is for 20% VAT on the product but 5% on the labour.
However, solar panels, water and wind turbines will not be eligible. The consultation document suggests that these are not sufficiently about the ‘provision, construction, renovation and alternation of housing, as part of a social policy’ that the EU requires.
For details see the consultation document here.
The consultation will close on 3 Feb 2016.
Photo: Howard Lake
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