Treasury consults on VAT hike for energy efficiency and microgeneration kit

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European CommissionInstalling small wind turbines and solar panels may become more expensive from August 2016 as the Treasury is forced to implement VAT changes by the EU.

Other energy saving materials – from insulation to new boilers – may be spared a VAT hike from 5% to 20%.

The EU said in 2012 would take the UK to court if it did not bring its VAT rules in line with the Bloc (see this link, private browsing may be required to access content).

The Treasury held its ground but ultimately lost the case in court earlier this year.

Now Treasury is consulting on the changes and explaining the impact they will have on energy saving equipment and microgeneration.

While industry has had several years to prepare for the changes, the ruling could not have come at a worse time for solar installers and suppliers already struggling with cuts to subsidies and resulting demand destruction. Treasury said this sector was likely to bear the brunt of the change. That is because accounting rules around installation costs versus material costs – and the treatment of some measures as ‘renovation’ as opposed to ‘generation’ – may allow other energy saving materials to maintain the lower rate.

See the consultation

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