Contact: Anderson Anderson Brown (Scotland)
In a Tribunal case, the judge decided that the 5% rate could not be applied to energy-saving materials installed together with standard rated items.
The 5% VAT rate applies to the supply and installation of specified energy-saving materials e.g. solar panels. A N Checker Heating and Service Engineers installed new heating systems in people's houses. To the extent that the installation included energy-saving materials, the company only charged VAT at 5% on its bills with the result that the overall VAT amount charged was reduced. The Judge conceded, reluctantly, that the legislation does not allow the reduced rate to apply where energy-saving materials are installed as part of an overall job.
This conclusion appears to conflict with an earlier decision in the European Court (Commission v France). Also, it would be strange to say the least if beneficial measures to save energy could only be subject to the 5% VAT rate when supplied on their own!
The decision demonstrates that care needs to be taken when applying mixed rates of VAT to composite supplies.
