VAT good news on renewables?

Looks like there's good news on the VAT front with a Labour-backed amendment to the Finance Bill, which could safeguard the special 5% VAT rate on renewable energy heating systems.

Having reported a few months back that it looked likely the special 5% VAT rate would be disappearing this summer, due to a European Court of Justice ruling, this could be set to change.

There's been an amendment tabled to the Finance Bill by a cross party group of MPs objecting to the move and now Downing Street has said it will not oppose an amendment to the Bill to retain the 5% rate. 

At the same time, the European Commission has said it will bring forward proposals to allow “flexibility” in the VAT rates applied to different products within EU countries.

While nothing is yet certain, this "flexibility" could mean Brussels won't challenge the move, or impose fines on the UK for non-compliance with EU rulings, and the 5% rate could be here to stay.

It's been a major benefit to customers considering going green as it makes a renewable energy heating system significantly more affordable. A hike to 20% VAT would really fly in the face of efforts by member states to hit their binding carbon targets.

Perhaps this is evidence of an outbreak of Euro-sanity in the run up to the June Referendum? Whatever the motivation, here at Yorkshire Heat Pumps we see this as a very welcome move.

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