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5% Reduced VAT rate for energy saving materials threatened

The EU, now bored of cucumbers, have set their sights on our reduced VAT rate on renewables 708/6. Will they force it out like the F.I.T.?



The European Commission has started the second stage of an infringement procedure against the UK with their goal being to abolish the reduced VAT rate on energy saving materials and renewables. If we don't comply within two months then they may then take the UK to the European court.

At the moment Notice 708/6 means that we a reduced rate of 5% VAT applies to the supply and install of energy saving materials. This also includes things like biomass boilers, solar thermal panels, wind turbines, etc. This provides a much needed impetus and support for the renewables industry, especially as the domestic stage of the Renewable Heat Incentive domestic was delayed, delayed and then more or less shelved (we should know the details later this year to take effect next summer but I am not holding my breath at this stage). Because the scheme supports only supply AND installation this means that it encourages the supply and installation of these energy savings materials by local companies who are, hopefully, experts in their trade. Certainly we supply a lot of biomass boilers to expert installers whose customers benefit from the reduced rate.

Lets hope that the UK argues its corner, after all the Feed In Tariff saga all boiled down to compliance with the EU. The Feed In Tariff is paid for by additions to energy bills so there is actually no budget as such but the EU sets a ceiling for it is viewed as a tax. That, combined with what might charitably be described 'taking your eye off the ball' by Defra, meant that the FIT had to be curtailed quicksharp or the EU ceiling would be breached. This resulted in a semi collapse of the industry which had erupted around the tariff and is why I get daily emails trying to sell me the latest PV panels at a quarter of the price that they were a few months ago.


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