Consultation outcome

Draft legislation: VAT (Reduced Rate) (Energy-Saving Materials) Order 2019

This consultation has concluded

Detail of outcome

We had 14 responses from businesses, industry and tax representative bodies.

The main concern was that the changes would affect combined solar panel and battery installations in residential accommodation. These will continue to fully benefit from the relief when supplied to the over-60s, relevant housing associations and relevant residential accommodation.

However, there are expected to be instances where the cost of the materials exceeds 60% of the total value of the supply of these combined installations, meaning that only the labour cost element would qualify for the reduced rate.

There was recognition that the UK had to comply with EU law and general agreement that the legislation itself met the objective of complying with EU law. The 2015 to 2016 consultation had originally proposed the full removal of the VAT relief for solar panels.

Since then, the government has engaged in further discussions with the EU Commission with the aim of minimising the impact on businesses and consumers from the changes. This has resulted in the retention of solar panels as energy-saving materials and the introduction of the 60% threshold.

No changes were made to the legislation as a result of the consultation but we are very grateful to respondents for their comments, which will improve guidance on these changes. The legislation was approved by Parliament on 26 June and will take effect from 1 October 2019.

You can read the VAT (Reduced Rate) (Energy-Saving Materials) Order 2019, including an explanatory memorandum, and also a tax information and impact note.

Original consultation

Summary

We are seeking views on draft legislation that amends the scope of the reduced rate for energy-saving materials to ensure consistency with EU law.

This consultation ran from
to

Consultation description

Following a consultation in 2015 to 2016, we want your views on updated draft legislation to amend the scope of the VAT relief for the installation of energy-saving materials (ESMs) in residential accommodation. The changes retain as much of the relief as possible, while ensuring compliance with EU law (please see the Court of Justice of the European Union ruling in 2015).

The proposed amendments will:

  • maintain the reduced rate on installations of ESMs in residential accommodation for recipients who are aged 60 or over or receiving certain benefits, and for housing associations
  • remove the reduced rate for the installation of wind and water turbines
  • maintain the reduced rate for all other installations in residential accommodation where the cost of the materials does not exceed 60% of the total cost of installation

Before responding, you can read the documents on this page:

  • draft legislation
  • draft tax information and impact note
  • draft explanatory memorandum
  • draft guidance

Documents

(Draft) The Value Added Tax (Reduced Rate)(Energy-Saving Materials) Order 2019

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email different.format@hmrc.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

(Draft) explanatory memorandum

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email different.format@hmrc.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

(Draft) Tax information and impact note

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email different.format@hmrc.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

(Draft) VAT: guidance on changes to energy-saving materials

This file may not be suitable for users of assistive technology. Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email different.format@hmrc.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

Published 8 April 2019
Last updated 10 July 2019 + show all updates
  1. Added outcome summary, including a link to the final regulations and a tax information and impact note.
  2. First published.