The European Commission has announced that it will refer the UK to the EU Court of Justice over the reduced VAT rate for the supply and installation of energy-saving materials, which includes solar PV and solar thermal modules..
The European Commission states that there is no provision in the VAT Directive to allow a universal application of reduced VAT rate for energy saving materials, and that the UK’s current application of a reduced VAT rate breaks EU law.
The reduced rate applies to installations of:
• Controls for central heating and hot water systems
• Draught stripping
• Solar panels
• Wind turbines
• Water turbines
• Ground source heat pumps
• Air source heat pumps
• Micro combined heat and power units
• Wood-fuelled boilers
The European Commission states that: “Member States themselves unanimously decided on the list of goods and services that could benefit from a reduced VAT rate, and they also insisted that this list be strictly applied, with no room for manoeuvre or interpretation.