Source · Select Committees · Environmental Audit Committee
Recommendation 41
41
Acknowledged
Paragraph: 216
We recommend that Ministers evaluate the impact of the time-limited zero- rate of VAT for...
Recommendation
We recommend that Ministers evaluate the impact of the time-limited zero- rate of VAT for the installation of certain Energy Saving Materials well before its expiry date of 2027, with a view to extending the provision beyond 2027 if it has made a demonstrable and positive contribution to meeting carbon budgets and the Government’s Net Zero objectives. We also recommend that Government go further and consider harmonising the VAT rates of new build and retrofit work. Building to net zero: costing carbon in construction 71 We have already recommended that the Government consider extending the zero- rate of VAT to innovations which improve energy efficiency, such as energy storage systems
Government Response Summary
The government acknowledges the importance of ESMs, but states that further changes to VAT would require careful consideration and consultation to ensure value for money and prevent unintended behavioral effects, in the context of over £50 Billion of requests for relief from VAT received since the EU referendum.
Paragraph Reference:
216
Government Response
Acknowledged
HM Government
Acknowledged
It is important to recognise that the changes to the ESMs relief announced at Spring energy efficiency of their homes, bolstering the UK’s energy security and contributing to our transition to Net-Zero. efficiency, such as energy storage, would require careful consideration and consultation to ensure changes represent value for money and would not have unintended behavioural effects. The Government recognises the importance of ensuring that policy remains in step with the rapid pace of technological development in the ESMs market and the changing policy context since this particular relief was first introduced. However, any further changes should also be viewed in the context of over £50 Billion of requests for relief from VAT received since the EU referendum. Such costs would also have to be balanced by increased taxes elsewhere, increased borrowing or reductions in government spending. Regarding the recommendation that the ‘Government go further and consider harmonising the VAT rates of new build and retrofit work’ please see our response to recommendation