VAT cut vital for energy targets

The HVCA and several other major sector bodies are backing calls for a cut in the rate of VAT charged on energy saving measures.

A reduced rate of 5% applies to the professional installation of certain energy saving materials and micro generation systems. However, this excludes some obvious energy saving options, including energy efficient boilers and low emissivity glass, even though these measures are likely to receive funding under the Green Deal.

The association believes that having a variable rate of VAT applicable to Green Deal measures will create a perverse incentive, as will the 5% rate of VAT on energy use while steps to cut energy bills often attract the 20% rate. 

Incentives
The industry is concerned that, without an additional package of incentives, few owners and occupiers will take action to improve the energy efficiency of their buildings, even if the upfront costs are met by Green Deal finance.

Therefore, the HVCA is joining a campaign urging MPs from all parties to ask the Government to levy VAT at a rate of 5% for all Green Deal approved measures. 

The Government has designed the Green Deal to support a ‘whole house’ approach to improving energy efficiency as installing some measures will not have the benefit intended if the heat energy is lost elsewhere. Therefore, the association believes that all households should be entitled to the same rate of VAT for their complete Green Deal package.

A 5% rate of VAT for Green Deal approved measures will also make it easier to meet the so-called Golden Rule, which requires the expected energy bill savings to be equal to or greater than the cost of repayment for the package of measures. 

For further information about the campaign contact Beatrice Orchard - 020 7092 3876 / beatriceorchard@fmb.org.uk