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Industry forces Government climbdown over VAT rate

The Government is to keep the current reduced rate of Value-Added Tax on the supply and professional installation of energy-saving materials despite losing a European court case last year. The Builders Merchants’ Federation has welcomed the news.

Industry forces Government climbdown over VAT rate

The Prime Minister told the House of Commons that his Government will not oppose a move by Conservative MPs – acting with the Labour Party – to stop VAT on insulation, heating & hot water system controls, heat pumps, and solar panels being levied at the 20% standard rate.

Since June 2012, the BMF has lobbied to keep 5% VAT on energy-saving materials defined in eleven product categories under EU law. On several occasions, Brett Amphlett, BMF Policy & Public Affairs’ Manager has raised it in person with politicians – including twice with the Prime Minister and twice with the Financial Secretary to the Treasury, David Gauke MP, the minister with day-to-day responsibility for VAT.

In June 2012, the European Commission told the UK Government to amend the law to elevate VAT charged on insulation, heating & hot water system controls, heat pumps, and solar panels to the 20% standard rate. Brussels said the current 5% rate was illegal and in June 2015, the European Commission won a case in the Court of Justice. There is no further right of appeal.

A three-and-a-half year BMF lobbying campaign to keep existing tax relief took a final twist this week when the Labour Party put down amendments to the Government’s Finance Bill to prevent the existing rate going up from 5% to 20% – a 400% increase. Faced with a defeat if it had gone to a vote, ministers climbed down and agreed to allow their own legislation to be amended by the Opposition to give the Treasury the power to resist the EU VAT rules.

, commented:

“We are very pleased the Government will keep the reduced rate on materials and products that BMF members distribute. This is a significant victory for the BMF. I was in Parliament yesterday to keep up efforts in favour of 5% on the day MPs voted on George Osborne’s amended Budget”.

“Now the legislation has been passed, improvements can continue to enjoy the 5% rate to make homes warmer, cut bills and save money. That is good news for merchants, manufacturers, solar panel installers and insulation contractors”.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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