No rise in VAT for five years reconfirms HMRC

There was good news for the renewables sector yesterday as HMRC restated there is to be no rise in VAT for five years.

Amid concerns raised by a European Court of Justice (ECJ) regarding the Tory government’s proposed ‘tax lock’ until 2020, HM Revenue & Customs (HMRC) have moved to reiterate their intentions of freezing income tax, national insurance and VAT for at least five years.

An EJC ruling had stated the UK’s lower VAT rate for energy saving measures was against its VAT directive. However, the government has moved to reconfirm their intention of upholding their pledge, news that is good for the renewable sector.

Current legislation on solar PV and solar thermal installs on residential accommodation allows them to benefit from a reduced 5 percent rate of VAT, making these alternatives far more financially viable.

This reconfirmation of intent highlights the party’s commitment towards the growth of renewable energy. Fears had risen that a hike in VAT on residential solar PV and solar thermal installations from 5 percent to 20 percent would have a negative impact on the UK’s environmental scheme, the Green Deal, but the latest statement of intent has gone some way to dispel concerns.

Bernard Hughes, communications director at the Green Deal Finance Company, was quick to highlight that “There is a long way to go in this debate and it is much broader than the Green Deal.”