EU takes UK to court on Green energy saving VAT

Sat 23rd Feb 2013

The EU’s European Commission has this week referred the UK to the European Court of Justice (ECJ) to force it to raise its VAT rate on household energy saving improvements from 5% to 20%.

UK reduced VAT on solar panels, hot water improvements

EU member states are permitted by the EU’s VAT Directive to levy reduced VAT rates on certain products and services which promote social wellbeing.  This includes books, education, public transport, housing, medicines etc.

The UK currently levies its 5% reduced rate on the installation of solar panels, efficient hot water system in houses.  However, these services are not listed in the EU’s VAT Directive as entitled to the reduce VAT rates.

The EC has therefore warned the UK in 2012 that it must raise the rate on these services to 20%.  Since the UK did not act on this warning, the EC on Thursday of this week referred the UK to the ECJ.

Any decision on this will take up to 15 months, and will dent the UK Government’s Green Deal offer.

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