UK government to fight Brussels on reduced energy efficiency VAT
The government has confirmed that it will fight the European Commission over VAT on energy saving materials (ESM).
- Bluefield Solar to extend Norfolk solar farm
- UK wholesale power market is opening up, say small suppliers
- Dee Valley profits hit by tax changes
- New European Commission pushes ahead with new energy security policies
- Northumbrian Water to start £5m sewer upgrade to hit tougher EU bathing water targets
In June (see this link), the Commission said that if the UK did not move to raise VAT from 5 per cent to 20 per cent on energy efficiency goods and services within two months, it may refer the matter to the European Court of Justice.
The move caused consternation in industry because of the implications it would have on programmes such as the Green Deal.
At the time Treasury indicated it would challenge the Commission, and last week a coalition of companies which would be affected by a higher VAT rate urged the government to "robustly defend" its postion. The Commission's deadline is now up and HMRC announced today that it has responded, and will defend the UK's VAT relief. HMRC posted a briefing note here on its next steps.
The note says that the EC has commenced these proceedings on three grounds:
i) That there is no specific provision in EU law to allow a reduced rate for ESM;
ii) That the EU provisions on which the UK relies as the legal basis for the reduced rate (Category (10) of Annex III to the Principal VAT Directive) only apply where introduced 'as part of a social policy', whereas the UK's relief for ESM has been introduced as part of an environmental policy;
iii) That the UK's relief is too wide as the EU provisions on which it relies apply only to housing, which does not include buildings used for a relevant charitable purpose.
HMRC said that government "reluctantly" accepted the third point and had already made provision for it in this year's Budget. It will legislate so that charitable buildings will likely have to pay the higher VAT rate from August 2013 and wants stakeholder feedback on the move. However, it will defend its position on the other two grounds.
The timetable for EC action, and what would happen if the UK loses, is not yet clear. The Green Deal launches in October.
- UK energy sector is a heavyweight infrastructure investor Recent research by EY identifies the huge scale of energy firms’ investment in UK infrastructure, but Tony Ward and Jamie...
- Centrica earnings revised lower Centrica reported weaker than expected financial results on Thursday, becoming the third of the big six energy suppliers to...
- Electricity set to heat 80 per cent of homes by 2050, says think tank Electricity will be the dominant heating source for 80 per cent of buildings by 2050, according to Carbon Connect.