Changes in Tax on Green Measures for Charitable Buildings

(Before It's News)

Tax is always a complicated matter and is seldom fair or, in modern jargon, “progressive”. It does get progressively complicated, so complicated that armies of clever people are paid to find their way around it and to advise on what its rules are, or may be, because you can rarely be definite when it comes to tax.

For example value added tax is levied throughout the European Union. Each nation sets its own rate of VAT and virtually everything is taxed. In the UK the VAT rate is now 20% but there are some exemptions from this, because some items (like books) are not taxed at all and other items like solar panels and insulation in buildings are taxed at 5%, just like gas and electricity.

Now the European Union officials (those well paid well pensioned and well clever people) do not like the 5% rate and are seeking its abolition in the United Kingdom on the basis that it is not allowed. The UK government have considered whether the 5% rate is allowed and have come to the conclusion that the 5% rate should be withdrawn from energy saving materials and solar thermal panels in buildings used for a charitable purpose, but not for residential buildings. Technically it seems that the reduced rate can only be implemented for social policy reasons and not environmental policy reasons, and the rules do not allow the reduced rate to be used on charitable buildings.

There you have it – the EU has its rules which must be followed regardless of the environmental consequences. I note that no objection has been made about the UK allowing only 5% VAT on fossil fuel produced heat and power. This is a curious way of thinking – tax what is environmentally essential and allow reduced tax on what is environmentally damaging. I did write at the beginning that tax is complicated.

However, (there is always a “however”) the 5% rate that will be increased to 20% applies only to installations in buildings used for charitable purposes. The government of the UK will defend the EU’s claim that residential installations should rise to 20% and that case will take years and years before a decision is made.

So the only losers will be the charities.  The government has announced that the rate charge will take effect on 1^st August 2013, so if you are a charity thinking of insulating your building or installing solar panels heating controls or other green energy measures, then you ought to stop thinking and start installing because otherwise you will have to pay more VAT.

You can read the government’s position and make representations at http://www.hmrc.gov.uk/briefs/vat/brief2612.htm

Filed under: climate change, energy, global warming, solar energy, solar panels Tagged: charities, energy saving measures, green measures, value add tax, vat, VAT rate 5%

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