Treasury urged to remove VAT on energy efficiency measures

Trade body says elimination of the VAT could help rapid carbon reductions

The government has been urged to remove VAT on energy efficiency retrofits.

The Association for Decentralised Energy (ADE) wrote a letter to the Chancellor saying that 20% VAT charged on retrofitting domestic insulation should be slashed to zero.

In the open letter which was signed by 16 members and seven other organisations the trade body said the removal of VAT on green retrofit measures could bring significant carbon reductions.

It is also believed that it could act as a “major stimulus” to the market and create 42,000 construction jobs and an additional 53,000 jobs in the wider economy.

Chief Executive Officer of the ADE Lily Frencham said: “Retrofitting the UK’s inefficient homes will require public and private investment. Zero-rating VAT is a simple incentive to increase private investment that works with the market for home renovation.

“It would simplify a complex system and result in a net gain for the UK economy, as well as improving the UK’s housing stock and enabling more families to enjoy warm and healthy homes – ultimately, by failing to act on this, the government is missing a significant opportunity to deliver on net zero compliant buildings.”

A HM Treasury spokesperson told ELN: “We thank the ADE and its partners for their engagement on this important issue. We will consider their report as we do with all engagement from our stakeholders on tax policy.

“The government already maintains a reduced rate of 5% VAT for the installation of many Energy Saving Materials – such as solar panels – and is investing £3 billion over this Parliament to help more than half a million lower income homes become more energy efficient, saving households £290 on average.

“We keep all taxes under review.”

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