ACE has submitted its response to HMRC’s consultation on proposed changes to the reduced rate of VAT for the installation of energy saving materials in compliance with a recent decision by the European Court. In the summer of 2012, ACE took the lead in convening a broad coalition of interested organisations who were concerned about the implications of the Reasoned Opinion sent by the European Commission to the UK Government to the effect that its 5% reduced rate of VAT on energy saving materials went beyond the scope of the 2006 European VAT Directive. Over subsequent years we have led the coalition in:
- encouraging the UK Government to respond robustly to the Commission in defence of its reduced rate;
- providing the Government with a detailed report setting out the reasons we believed that the UK’s reduced rate did in fact form part of a social policy;
- liaising closely with officials both before and after the CJEU judgment, setting out our view that the UK Government should use the vires in both Category 10 and Category 10(a) of Annex III of the VAT Directive to retain as much as possible of the reduced rate.
Notwithstanding a few concerns, we broadly welcome the Government’s proposals.