Businesses demand clarity on VAT rates for energy-saving equipment

Businesses from the renewables and energy efficiency sectors have written to George Osborne calling for a clear statement on whether he will change VAT rates for solar panels, insulation, and other energy-saving equipment.

The VAT for these products is currently 5% – a rate which the European Court of Justice ruled in June was unlawful under EU VAT directives.

Since that ruling, the UK Government has offered no clear statement on how it intends to proceed.

A spokesperson said at the time: “The Government has committed to a tax lock that will rule out rises in income tax, NICs and VAT during this Parliament and we will deliver it.”

However Britain would face penalties if it does not change the law in response to a European Court of Justice ruling.

In response to this lack of direction, a group of sustainability business, including the Solar Trade Association, the Sustainable Energy Association and the UK Green Building Council, wrote to George Osborne on Friday, ahead of this week’s budget.

The letter read: “Uncertainty as to the timing of any changes is particularly unsettling for market and investor confidence. This is especially the case if the industry cannot obtain clear reassurance that nothing will change in the short-term whilst Government deliberates on what to do next.

“It would therefore greatly boost industry confidence if Ministers were to confirm that nothing (if anything) will change until the March 2016 budget at the earliest and possibly considerably after. We would welcome a clear statement by a Minister to this effect as part of the package of announcements in next week’s mini-budget.”

Equipment currently eligible for the 5% VAT rate includes insulation, solar panels, wind turbines, heat pumps, micro combined heat and power units and wood-fuelled boilers.

Full text of the letter sent to the Chancellor

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie