EU blocks UK VAT break on energy-saving measures

Fri 5th Jun 2015

The European Court of Justice today held that the UK would have to raise VAT on the supply and install of a range of household energy saving measures from 5% to 20% with immediate effect. The court case had been brought by the European Commission.

The UK measures subject to the reduced VAT rate included: installation of solar panels; insulation for roofs and walls; and energy-efficient hot water systems for homes.

Under the EU VAT Directive, member states may vary VAT rates on certain products. However, the Directive limits these derogations tightly, and energy-saving measures are not included.

This may be a blow to the government’s Green Deal offer, which offers domestic energy-saving improvement packages. But the UK is bound by the Directive and the ECJ’s ruling.

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