Reduction not compliant

The European Commission (EC) wrote to the UK September 2011 saying the system of reduced rates in VATA 1994 s 29A was incompatible with the VAT Directive.

The UK accepted its legislation was contrary to European law and confirmed that the 2013 Budget  would withdraw the reduced rate of VAT that applied to the installation of energy-saving materials in buildings intended for use solely for a relevant charitable purpose.

The commission was not satisfied and referred the matter to the Court of Justice of the European Union which ruled that a reduced VAT rate for supplies of services of installing energy-saving materials and supplies of such materials could not be considered as adopted for reasons of social interest regardless of the housing and people concerned.