VAT Changes to the Reduced Rate for Turbines

VAT Changes to the Reduced Rate for Turbines

  • 11 Jul 0

The Government has introduced a measure to remove the reduction in the 5% VAT rate for the installation of wind turbines and water turbines. Businesses that provide and install energy-saving materials (ESMs) and customers who have the ESMs installed will be affected. The measure brings consistency with the requirements of existing legislation governing the application of VAT in the EU. The UK is required to follow the judgement of the CJEU (Case C-161/14), which narrows the scope of the reduced rate. Currently, a reduced rate of 5% VAT applies to the installation of certain ESMs in residential accommodation.

The measure amends the scope of the reduced rate, limiting the reduced rate to the labour cost element of a supply of installation where the value of the materials exceeds 60% of the total cost charged to the customer. However, this restriction will not apply where the customer satisfies certain conditions (is aged 60 or over or is in receipt of certain benefits), the supply is to a relevant housing association or the building in which the ESMs are installed is used solely for a relevant residential purpose. In all other respects, the relief is retained in full.

The measure will affect installations of affected ESMs from 1st October 2019. The reduced rate will remain fully available (except on wind and water turbines) for supplies of services of installing ESMs in residential accommodation where the supply is made to a qualifying person (a person who is aged 60 or over or is in receipt of certain benefits), a relevant housing association or where the residential accommodation is a building or part of a building used solely for a relevant residential purpose. Otherwise, the reduced rate will be available provided that the value of the ESMs does not exceed 60% of the total value of the supply of installing the ESMs. All supplies that have been paid for before 1st October 2019, or supplies made under contracts entered into prior to that date, are unaffected by these changes. The Government has introduced a measure to remove the reduction in the 5% VAT rate for the installation of wind turbines and water turbines. Businesses that provide and install energy-saving materials (ESMs) and customers who have the ESMs installed will be affected. The measure brings consistency with the requirements of existing legislation governing the application of VAT in the EU. The UK is required to follow the judgement of the CJEU (Case C-161/14), which narrows the scope of the reduced rate. Currently, a reduced rate of 5% VAT applies to the installation of certain ESMs in residential accommodation. The measure amends the scope of the reduced rate, limiting the reduced rate to the labour cost element of a supply of installation where the value of the materials exceeds 60% of the total cost charged to the customer. However, this restriction will not apply where the customer satisfies certain conditions (is aged 60 or over or is in receipt of certain benefits), the supply is to a relevant housing association or the building in which the ESMs are installed is used solely for a relevant residential purpose. In all other respects, the relief is retained in full. The measure will affect installations of affected ESMs from 1st October 2019. The reduced rate will remain fully available (except on wind and water turbines) for supplies of services of installing ESMs in residential accommodation where the supply is made to a qualifying person (a person who is aged 60 or over or is in receipt of certain benefits), a relevant housing association or where the residential accommodation is a building or part of a building used solely for a relevant residential purpose. Otherwise, the reduced rate will be available provided that the value of the ESMs does not exceed 60% of the total value of the supply of installing the ESMs. All supplies that have been paid for before 1st October 2019, or supplies made under contracts entered into prior to that date, are unaffected by these changes.


Leave A Comment


Categories

  Latest Tweets