Solar panels may lose green tax break

Last week the European Commission ordered Government to remove the legislation that currently allows reduced VAT rates for “green” goods and services on the grounds that it failed to comply with the EU's VAT Directive. Today, after concerns were raised about the true impact of this move, the European Commission has offered the UK a way round a ruling.

The UK Treasury currently charges a five percent rate of VAT on some energy-saving materials, such as solar panels, insulation and other energy-efficiency measures, instead of the standard 20 percent. This reduced rate has offered UK home and business owners an additional incentive to ‘go green’, and is expected to work hand-in-hand with Government’s flagship energy policy, the Green Deal, which is due to be launched in October this year.

Those working within the energy industry argue that if this reduced rate is pulled, the Green Deal will be significantly affected as the policy works by ensuring that monthly repayments for energy efficiency measures do not cost more than the resulting energy savings they deliver.

While it looked like the Treasury would have to fight to keep the reduced rate; the European Commission has now come out and said that the UK could defend the exemption using a clause in the VAT Directive that allows reduced VAT rates on construction and renovation programmes that are part of a “social policy.”

It is thought that the ECO or Green Deal schemes could fit into this social policy category; however Government is now required to provide evidence to prove this is the case.

Newsletter

We won't share your details - promise!

Preview Latest

Solar Business Focus UK »

The must-have UK solar installer magazine.
Subscribe today!

Only £60 for five editions sticker
Solar Business Focus UK Magazine Cover

Latest MCS Products »

  • Ground Source Heat Pump
    OCHSNER Warmepumpen

    GMSW 7 plus, GMSW 10 plus, GMSW 10 plus S, GMSW 15 plus and GMSW 17 plus ground source units

    Certificate: BBA 0037/1
  • Ground Source Heat Pump
    OCHSNER Warmepumpen

    GMSW 7 plus, GMSW 10 plus, GMSW 10 plus S, GMSW 15 plus and GMSW 17 plus ground source units

    Certificate: BBA0037/2
  • Solar Photovoltaic
    Solaria Energia Y Medio Ambiente S.A.

    S5M150W to S5M185W with increment of five S6P195W to S6P240W with increment of five S6M195W to S6M245W with increment of five S6M2G195W to S6M2G245W in increments of five

    Certificate: BBA0040