Asked by: Siobhan Baillie (Conservative - Stroud)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has published a full list of products and services that qualify for the VAT reduction to energy saving materials, announced in the Spring Statement.
Answered by Lucy Frazer
A full list of energy-saving materials that, when installed in residential accommodation, qualify for the VAT reduction announced at Spring Statement 2022 has been published in section 2.10 of Energy-Saving Materials and Heating Equipment (VAT Notice 708/6), which is available on GOV.UK.
Asked by: Siobhan Baillie (Conservative - Stroud)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to remove VAT on (a) heat pump radiators and (b) other home upgrade products that use energy savings materials.
Answered by Lucy Frazer
At Spring Statement 2022, the Chancellor announced the expansion of the VAT relief on the installation of energy saving materials (ESMs) to residential accommodation in Great Britain.
The changes reverse restrictions introduced in 2019 following a Court of Justice of the European Union ruling, including re-instating wind and water turbines as qualifying materials, and removing complex eligibility conditions. Further to this, qualifying installations, including ground and air source heat pumps, will benefit from a VAT zero-rate until April 2027. Overall, this represents an additional £280 million of support for investment in ESMs over the next 5 years.
The changes to the VAT treatment of ESMs announced at Spring Statement 2022 were brought in at pace to immediately support households to improve the energy efficiency of their homes, bolstering the UK’s energy security and contributing to our transition to Net-Zero.
In order to accelerate take-up and prevent loss of investment, the changes were brought in from 1 April 2022, 10 days after Spring Statement 2022. A longer delay between announcement and implementation risked having an adverse effect on the ESMs market, i.e. in anticipation of future relief business and consumers may have otherwise delayed entering into a contract thereby causing a temporary stalling effect in the market, and risking supply bottlenecks further down the line.
Evaluating the case for adding new technologies to the relief would require careful consideration and consultation to ensure changes represent value for money and would not have unintended behavioural effects, a process which would have delayed making changes to immediately benefit the public.
The Government keeps all taxes under review and continues to welcome representations on how the tax system can be improved. It is important that Government policy takes into account the pace of technological development in the ESMs market and the changing policy context since this particular relief was first introduced. That said, requests for further changes should be viewed in the context of over £50 billion of requests for relief from VAT received since the EU referendum. Such costs would have to be balanced by increased taxes elsewhere, increased borrowing, or reductions in Government spending.
Asked by: Siobhan Baillie (Conservative - Stroud)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether people who purchase energy saving products not through an installer will be covered by the VAT reduction.
Answered by Lucy Frazer
At Spring Statement 2022, the Chancellor announced the expansion of the VAT relief for the installation of energy saving materials (ESMs) in Great Britain from 1 April 2022.
This relief will continue to apply to the installation of ESMs, rather than the direct purchase of the materials themselves. However, complex eligibility conditions, introduced in 2019 following an EU Court of Justice ruling, have been removed.
Further to this, wind and water turbines have been reinstated as materials which qualify for the relief, and all qualifying installations will also benefit from a VAT zero-rate until April 2027. Overall, this represents an additional £280 million of support for investment in ESMs over the next 5 years, building on the £9.7 billion that the Government has committed to invest since March 2021 to increase the energy efficiency and decarbonisation of our homes and buildings.
Targeting the VAT relief on professional installations ensures that the Government supports best practice in the choice and installation of ESMs. Going further would impose additional pressure on the public finances, to which VAT makes a significant contribution. VAT raised around £130 billion in 2019-20 and helps to fund key spending priorities. As you will know, any reduction in tax paid is a reduction in the money available to support important public services, including the NHS and policing.
Given this, although the Government keeps all taxes under review, there are no plans to further extend the VAT relief to direct purchases of ESMs.