Question to the HM Treasury:
To ask the Chancellor of the Exchequer, under what circumstances low carbon investments pay (a) 20 per cent and (b) five per cent VAT.
VAT is a broad-based tax on consumption and the 20 per cent standard rate applies to most goods and services. While there are exceptions to the standard rate, these have always been limited by both legal and fiscal considerations.
One such exception is the reduced rate of VAT of 5 per cent for the installation in residential accommodation of certain energy-saving materials such as ground source heat pumps, air source heat pumps and solar panels that help to reduce carbon emissions. Detail about the circumstances in which such reliefs apply can be found in Energy-saving materials (VAT Notice 708/6).