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HBA sees VAT ruling as retrograde step

House Builders Association | National Federation of Builders

2 min read Partner content

The House Builders Association comments on last week's ruling on VAT reductions by the European Court of Justice.

On 4 June 2015, the European Court of Justice (ECJ) struck down a British law that enabled a reduced rate of VAT for the installation of energy-saving materials in homes.

The Government had previously set a reduced 5% rate of VAT, compared to the standard 20% rate, on the repairs and installation works of energy-saving materials on homes that supported the Green Deal. This reduction was aimed in part at tackling fuel poverty, especially in the case of older people.

The European Commission filed a legal challenge against the UK Government for applying this discounted VAT rate to the private sector. The commission argued that such measure contravened the Common System of Value Added Tax 2006 directive, according to which lower rates of VAT in the housing sector can only be applied as part of social policy.

Rico Wojtulewicz, policy advisor for the HBA, commented: “The HBA is disappointed that the ECJ ruled against a lower VAT rate for low and zero carbon technology in private sector homes. Affordable housing policy should aim to tackle fuel poverty, with the government actively encouraging any industry which strives towards this objective. We struggle to understand how stifling the adoption of technologies that are finally reaching consumer maturity – such as solar, air and ground source heat pumps – can be positive for the long-term vision of carbon reduction and tackling fuel poverty.”

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