Homeowners urged to install renewable heating ahead of VAT rise

The Court of Justice of the European Union has ruled that the UK will no longer be able to offer a reduced 5% VAT rate on residential energy-saving products.

As a consequence, homeowners considering renewable heating installations have been told to act quickly if they wish to keep costs low.

The European Commission first ordered the UK to drop this tax break in 2013 because it did not comply with the EU’s VAT Directive. The basis of the UK Treasury’s appeal later that year was that upgrading homes not only saves emissions and boosts energy efficiency, but also has wider social benefits that justify the reductions.

Despite this appeal, the European Court of Justice ruled that the 5% VAT figure should only apply to transactions related to social housing, and until the UK instates this change, it will be fined on a weekly basis.

Although a date for this VAT reform has yet to be issued, it appears imminent.

Therefore, the sooner homeowners make the switch to renewable technologies, the more they are likely to save. Homeowners who wait could face an additional 15% surplus on their purchase, which is a significant expense when referring to domestic technologies such as solar panels that often cost homeowners thousands of pounds in installation costs before the benefits are felt.

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