In European Commission v UK and Northern Ireland (C-161/14) (4 June 2015), the CJEU found that the UK reduced rate on energy saving materials was in breach of the principal VAT Directive.
The European Commission was seeking a declaration that by applying a reduced rate of VAT to supplies of services of installing ‘energy saving materials’, and to supplies of such materials by a person who installs those materials in residential accommodation, the UK and Northern Ireland had failed to fulfill their obligations under the principal VAT Directive Art 98.
The CJEU noted that the principal VAT Directive precludes national measures, which extend the reduced VAT rate system to situations that are outside the social context. It rejected the UK’s argument that the aim of the reduced rate for energy saving material was to improve the quality of housing and the health of the people living in that housing. It explained that in the absence of differentiation according to levels of income, age or other criteria, the provisions could not be regarded as being adopted for social reasons.
Why it matters: In the wake of this decision, the UK is likely to amend the legislation on energy saving materials, thus removing a competitive advantage for many suppliers.
In European Commission v UK and Northern Ireland (C-161/14) (4 June 2015), the CJEU found that the UK reduced rate on energy saving materials was in breach of the principal VAT Directive.
The European Commission was seeking a declaration that by applying a reduced rate of VAT to supplies of services of installing ‘energy saving materials’, and to supplies of such materials by a person who installs those materials in residential accommodation, the UK and Northern Ireland had failed to fulfill their obligations under the principal VAT Directive Art 98.
The CJEU noted that the principal VAT Directive precludes national measures, which extend the reduced VAT rate system to situations that are outside the social context. It rejected the UK’s argument that the aim of the reduced rate for energy saving material was to improve the quality of housing and the health of the people living in that housing. It explained that in the absence of differentiation according to levels of income, age or other criteria, the provisions could not be regarded as being adopted for social reasons.
Why it matters: In the wake of this decision, the UK is likely to amend the legislation on energy saving materials, thus removing a competitive advantage for many suppliers.
