Written question asked by Stephen Williams (Liberal Democrat) on Thursday, 26 November 2009, in the House of Commons. It was due for an answer on Monday, 30 November 2009. It was answered by Stephen Timms (Labour) on Tuesday, 1 December 2009 on behalf of the Treasury.

VAT

Question: To ask the Chancellor of the Exchequer if he will make an assessment of the merits of amending the rate at which Value Added Tax is charged on equipment for (a) domestic renewable energy production and (b) increasing levels of energy efficiency as a mechanism for encouraging the use of such equipment.

Answer: VAT is a broad-based tax on consumer expenditure and reliefs from it have always been strictly limited; the Government continue to keep alltaxes under review.A value added tax rate of 5 per cent. applies to the domestic installation of certain renewable energy production technologies such as solar panels, wind turbines, air and ground source heat pumps and wood fuelled boilers. However, when such technologies are bought for 'do-it-yourself installation purposes, the standard VAT rate (currently of 15 per cent.) instead applies.European VAT agreements do not currently allow a reduced VAT rate for the 'do-it-yourself' installation of renewable energy production technologies or indeed for any products or materials designed to help increase levels of energy efficiency.The Government continue to make the case for changes to these European agreements to allow for a wider application of reduced VAT rates to energy-efficient products and energy-saving materials.

Secondary information