Member Article

VAT on energy – the threat from within

We’ve previously reported that the United Kingdom’s application of a reduced VAT rate on energy costs was under threat from the European Commission (EC). A House of Commons Select Committee could however pose a greater threat.

The EC has questioned whether VAT at the reduced rate constitutes a ‘subsidy’ and has threatened infraction proceedings if the UK continues to apply VAT at 5% to energy saving materials and installations.

It can surely be no coincidence that on Wednesday 10 July, Professor Paul Ekins (a prominent British academic in the field of sustainable economics) will answer questions before the Environmental Audit Committee (EAC) about a report he recently co-authored which argued that the VAT reduced rate ‘subsidy’ should be removed, with the additional revenue generated being used to target assistance for low-income households more directly.

Is the EAC signifying ‘abroad thoughts from home’ (to misquote Robert Browning)? We’ll be keeping a close eye on the findings of the EAC as any increase in VAT costs on energy must surely be reflected and offset in future tax and welfare budgets.

This was posted in Bdaily's Members' News section by Baker Tilly .