We are aware that the EU had commenced a review into how the UK applied the lower 5% VAT rate on renewable solutions and that the European Court have decided that this rate is not being applied correctly as the guidelines dictate.

Following on from the decision by the European Court, HM Revenue & Customs has issued their proposal on how the rates will most likely be applied, dated 9th December 2015 which contained a period of consultation that closed on the 3rd February 2016. They are currently reviewing these comments and we expect a final document decision soon.


HM Customs & Revenue

We see that the possible solutions affected are:

Category 10 is limited to supplies that amount to the ‘provision, construction, renovation or alteration’ of housing and Category 10a is limited to supplies that amount to ‘renovation or repairing ‘of private dwellings. The installation of ESMs can be seen as the “renovation” of a property but, in order to ensure that UK law is fully EU law compliant following the decision of the CJEU, we need to exclude certain items from the reduced rate in future on the basis that their installation cannot properly be said to ‘renovate’ a property (rather, they simply serve to generate electricity). These are:

 solar panels;  water turbines;  wind turbines.

These items will therefore be excluded from the reduced rate by amending the list of ESMs in Note 1 to Group 2.

If you would like any further help or information please feel free to call Paul O’Connor or David Pratt on 01531 – 828 782.