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The European Commission (EC) has asked the UK to amend legislation that allows a reduced VAT rate for the supply and installation of energy-saving materials.
The request is based on the ground that the measure goes beyond the scope allowed under the VAT Directive. The standard rate of 20% VAT should be applied, said the EC, which made its appeal in the form of a reasoned opinion, the second stage of an infringement procedure.
If the UK does not comply within two months, the commission may refer the matter to the European Court of Justice.
‘If the UK is forced to apply the full rate of 20% VAT to the installation of energy saving materials it could land a major blow to the government’s green deal,’ warned Lorraine Parkin, head of indirect tax at Grant Thornton.
She explained that ‘encouraging the reduction of carbon emissions in homes by allowing for the up-front costs of installing the materials to benefit from the 5% rate of VAT is a direct measure to encourage energy efficiency’.
