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The UK has a reduced rate of five per cent VAT for the installation of energy-saving materials in residential accommodation. However, the UK government is amending the scope of this after the Court of Justice of the European Union ruled that the scope of the reduced rate was too wide and that the standard rate of 20 per cent should apply in some cases.1 The UK government has consulted on the technical details of the changes.2 A related statutory instrument was passed by Parliament last month.3
There will be two changes that will impact on UK consumers. The amendments will remove the reduced rate on the materials element of the cost of installing energy saving materials in residential accommodation where the cost of the installed materials exceeds 60 per cent of the total cost of installation. In such circumstances, the 20 per cent standard rate of VAT will be chargeable on the materials, though the five per cent reduced rate will still be applicable to the installation services element of the cost. Further, wind and water turbines have been removed from the list of goods that are deemed energy saving materials, again increasing the VAT chargeable on those items to the 20 per cent rate.
However, the EU VAT rules allow the reduced rate of VAT to continue to apply to the installation of energy saving materials, including the materials themselves, whatever the cost of the materials, in housing where it is installed as part of social policy – for those meeting the relevant criteria.4
Alan McLintock, Chair of CIOT’s Indirect Taxes Sub-committee, said:
“The cost of installing solar panels is usually 80-90 per cent materials and the remainder the cost of installation services. Therefore, if the buyer cannot meet the social policy conditions, from 1 October 2019, they will suffer a 15 per cent increase in the VAT on the panels themselves, unless they have signed a contract for installation prior to that date. For an installation currently costing £6,000 - £7,000 including materials, the change in VAT rate will increase the price by approximately £700 -£800.”
Notes for editors
EC v UK: http://curia.europa.eu/juris/liste.jsf?language=en&num=C-161/14
The CIOT has responded to a HMRC consultation that sought views on draft legislation that amends the scope of the reduced rate for energy-saving materials to ensure consistency with EU law (link here). If there is a Brexit implementation period then, while the UK will no longer be an EU Member State, market access would continue on current terms and common rules would remain in place until the end of the period, meaning that business will trade on the same terms as now. For VAT and excise, this would effectively mean maintaining the status quo. While there may be flexibility in the future, during any implementation period the UK would need to adhere to EU VAT and excise rules, thus it is required to comply with the CJEU judgment.
Value Added Tax (Reduced Rate) (Energy-saving Materials) Order 2019 – link here.
The social policy criteria include:
Those 60 or over
Those in receipt of specified benefits
Relevant housing associations
Relevant residential dwellings
Para 14.6 of Notice 708 refers.
Para 6.2 defines a ‘relevant housing association’.
The EU VAT social policy currently does not include environmental inducements.
There will be two changes that will impact on UK consumers. The amendments will remove the reduced rate on the materials element of the cost of installing energy saving materials in residential accommodation where the cost of the installed materials exceeds 60 per cent of the total cost of installation. In such circumstances, the 20 per cent standard rate of VAT will be chargeable on the materials, though the five per cent reduced rate will still be applicable to the installation services element of the cost. Further, wind and water turbines have been removed from the list of goods that are deemed energy saving materials, again increasing the VAT chargeable on those items to the 20 per cent rate.
However, the EU VAT rules allow the reduced rate of VAT to continue to apply to the installation of energy saving materials, including the materials themselves, whatever the cost of the materials, in housing where it is installed as part of social policy – for those meeting the relevant criteria.4
Alan McLintock, Chair of CIOT’s Indirect Taxes Sub-committee, said:
“The cost of installing solar panels is usually 80-90 per cent materials and the remainder the cost of installation services. Therefore, if the buyer cannot meet the social policy conditions, from 1 October 2019, they will suffer a 15 per cent increase in the VAT on the panels themselves, unless they have signed a contract for installation prior to that date. For an installation currently costing £6,000 - £7,000 including materials, the change in VAT rate will increase the price by approximately £700 -£800.”
Notes for editors
EC v UK: http://curia.europa.eu/juris/liste.jsf?language=en&num=C-161/14
The CIOT has responded to a HMRC consultation that sought views on draft legislation that amends the scope of the reduced rate for energy-saving materials to ensure consistency with EU law (link here). If there is a Brexit implementation period then, while the UK will no longer be an EU Member State, market access would continue on current terms and common rules would remain in place until the end of the period, meaning that business will trade on the same terms as now. For VAT and excise, this would effectively mean maintaining the status quo. While there may be flexibility in the future, during any implementation period the UK would need to adhere to EU VAT and excise rules, thus it is required to comply with the CJEU judgment.
Value Added Tax (Reduced Rate) (Energy-saving Materials) Order 2019 – link here.
The social policy criteria include:
Those 60 or over
Those in receipt of specified benefits
Relevant housing associations
Relevant residential dwellings
Para 14.6 of Notice 708 refers.
Para 6.2 defines a ‘relevant housing association’.
The EU VAT social policy currently does not include environmental inducements.
22 Episodes
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This is one of two CIOT podcasts surveying aspects of the recent Budget. Here, John Whiting (Tax Policy Director) and Robin Williamson (LITRG Technical Director) look at some of the headline-making announcements, particularly from a LITRG point of view.
This is one of two CIOT podcasts surveying aspects of the recent Budget. Here, George Crozier (External Relations Manager) and John Whiting (Tax Policy Director) look at some of the more technical issues that didn’t all make the headlines.
The CIOT recently ran a round table to discuss how property taxes might develop. Attenders were from a wide range of organisations and a good debate ensued, which will be written up in a future Tax Adviser article. In the meantime, in this podcast CIOT Tax Policy Director John Whiting talks to three of the attenders about some of the points that came up: Chris Lallemand, Chair of CIOT Property Taxes sub-committee, LITRG member Eile Gibson and former CIOT President John Cullinane.
Dave Hartnett, Permanent Secretary for Tax, is interviewed about the recent UK-Switzerland tax deal by John Whiting, CIOT Tax Policy Director, and Gary Ashford, National Head of Tax Investigations and Dispute Resolution at RSM Tenon and a member of the CIOT Council. In the interview Mr Hartnett is asked about how the agreement was reached, for his response to accusations that it ‘lets fraudsters off’ and what UK residents with Swiss bank accounts – both legitimate ones where tax has been paid and those where tax has been evaded – should do now. The interview also covers the position of non-doms, offshore life bonds and where HMRC will go from here.
John Whiting talks to CIOT President Anthony Thomas about the recent joint CIOT/ATT response to the HMRC Tax Agent Strategy consultation. This initial response summarises views from nearly 1500 CIOT & ATT members; Anthony and John confirm our broad support for the strategic direction of the HMRC proposals but highlight some of members’ key concerns. The document can be found at http://www.tax.org.uk/tax-policy/public-submissions/2011/TAS_CIOT_ATT ; we will be submitting further comments next month so more input would be welcomed.
John Whiting, CIOT Policy Director talks to Tina Riches, Director, Technical, about the introduction of iXBRL and how it will impact tax advisers.
John Whiting talks to CIOT President Andrew Hubbard about the report Andrew has compiled into the way HMRC's new powers are bedding down. The report draws on Andrew's discussions with CIOT branches and with HMRC staff, plus the recent CIOT member survey and can be downloaded here.
What does 2011 have in store on the tax front? George Crozier talks to the Institute’s Tax Policy Director, John Whiting, and the Technical Director of the Low Incomes Tax Reform Group, Robin Williamson, about the tax and tax credit changes due to come in in April and beyond.
Please see below to read an accompanying aide-memoire and listen to the podcast.
CIOT Tax Policy Director John Whiting interviews the Institute’s President, Vincent Oratore, about the Institute’s proposals for reform of the process for making tax law, following the launch of a paper on the subject. The interview covers the flaws of the current system, the lack of parliamentary engagement in the tax law process and why a joint committee of the two Houses of Parliament to scrutinise tax legislation should be set up.
With all the party manifestos now published, the Chartered Institute of Taxation look at what the major parties are proposing for tax in the CIOT’s election 2010 podcast.
The panel begin by picking out the key points from each of the party’s manifestos, and what is on offer for low income taxpayers, before looking at a number of specific areas including national insurance, VAT, business taxation and green taxes.
Chaired by George Crozier, the Institute’s external relations manager, the podcast features John Whiting, the Institute’s tax policy director, and Robin Williamson, technical director of the Low Incomes Tax Reform Group.
George Crozier, External Relations Manager of the CIOT, talks to the Institute’s Tax Policy Director, John Whiting, and Technical Director, Tina Riches, about the tax provisions in the March 2010 Budget and what they mean for tax advisers. Areas covered include stamp duty changes, tax avoidance, pensions tax restrictions and Gift Aid.
John Whiting and Gary Ashford talk to Dave Hartnett, Permanent Secretary for Tax at HMRC, about the New Disclosure Opportunity and Liechtenstein Disclosure Facility. Dave comments on a range of issues around NDO/LDF raised by CIOT members.
The rules on Senior Accounting Officers’ responsibilities, introduced by s93 FA 2009, are some of the most controversial aspects of this year’s Finance Act. John Whiting, Tax Policy Director of the CIOT, talks to Simon Wilks, tax investigations partner with PricewaterhouseCoopers and CIOT representative on the group HMRC consulted with over the SAO guidance, about the SAO rules. Simon talks through which companies are affected, who is an SAO, what has to be done and when – and how this is all impacted by the HMRC guidance.
John Whiting, Tax Policy Director of the CIOT, talks to Peter Fanning, Chief Executive of the CIOT, about the CIOT’s submission on, and discussions about, the Working with Tax Agents consultation document.
John Whiting, Tax Policy Director of the CIOT, talks with Gary Ashford, Chairman of the CIOT's Management of Taxes Sub-Committee about the New Disclosure Opportunity and also the Liechtenstein disclosure facility.
John Whiting talks to Richard Mannion, Chairman of the CIOT's Owner Managed Business Sub-Committee, who reflects on Budget matters of relevance to smaller businesses and their advisers. He also comments on some practical issues on the Working Together agenda.
John Whiting talks to Tina Riches about the changes to HMRC Powers ahead of the Budget.
John Whiting interviews Peter Fanning, the new Chief Executive of the CIOT, about his time so far at the Institute.
John Whiting talks to Ian Menzies-Conacher, Chairman of the CIOT's Technical Committee, about foreign profits.
John Whiting talks through the possible changes relating to VAT in the upcoming Budget with Mike Arnold, Chairman of the CIOT's VAT and Indirect Taxes Sub-Committee.
If you are a CIOT Member, listening to this podcast counts as 11 minutes of unstructured CPD.
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