In June this year the European Commission ruled that the 5% reduced VAT rate the UK applies to the installation of energy saving materials for residential properties was deemed to be contrary to with EU law. The European Court considered that the UK had applied the reduced rate too widely.
We have been expecting an announcement that UK law will be changed as a result of this ruling early next year, however HMRC has today published a Business Brief confirming that the Government will not implement any changes before Finance Act 2016 (which usually obtains Royal Assent in July). Until this time, the installation of energy savings materials which serve residential properties will continue to be reduced rated.
Any homeowners who are considering installing energy saving materials such as solar panels, energy efficient insulation or larger projects such as wind turbines or biomass boilers may want to bring these forward to take advantage of the lower VAT rate while it still is available.
If you are affected by these changes and require further information please do not hesitate to contact our Senior VAT Manager Iain Masterton.