A recent EU ruling on the application of the UK’s reduced rate of VAT for energy saving equipment and materials is likely to increase costs for landlords with domestic properties and individuals who are either building or refurbishing their homes (who are not able to recover VAT incurred on their construction works).
Under current UK legislation, a reduced VAT rate of 5% is applied to the installation of energy-saving materials to make dwellings ‘greener’ – such as solar panels, insulation or micro-combi boilers.
However, the European Court of Justice has now decided that this interpretation is not in line with the relevant VAT Directive, which only allows the reduced VAT rate to be applied where there is a ‘social aspect’ to the works.
The judgement means that UK VAT legislation will have to be amended and the scope of the relief is likely to be significantly restricted. While there’s no clear timeframe for when this will be implemented, landlords would be wise to seriously consider bringing forward any energy efficiency improvements in order to take advantage of the current situation.
If you have any questions about how this might affect your rental property business, please call OneE Group on 0207 8701234 or send an email to email@example.com.
And to find out more about how the NLA can help you to make energy efficiency improvements, visit NLA Property Services.