Clause 191 - Reduced rate for energy-saving materials

Finance Bill – in a Public Bill Committee am 11:15 am ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

The clause relates to a reduced rate of VAT for energy-saving materials. The UK applies a reduced rate of 5% VAT to the supply and installation  of certain energy-saving materials. Reduced VAT for installation of energy-saving materials in buildings solely used for a relevant charitable purpose will be withdrawn by the clause. That follows legal proceedings initiated by the European Commission against the UK on the basis that the reduced rate is not allowed under EU law.

The European Commission, for three reasons, took the view that the UK was unlawfully applying the reduced rate. The Government have stated that they disagree with the Commission on the first two points, but accept the final point—namely, that charitable non-business buildings and village halls cannot properly be described as housing, which was the requirement under EU legislation.

The tax information and impact note for the clause states that the Government have informed the Commission of

“its intention to withdraw this reduced rate from charitable buildings as part of Finance Bill 2013… The subsequent publication of the EC’s Reasoned Opinion indicates that it intends to proceed with the infraction against the UK in any event.”

I am sure that that will get many Government Back Benchers swivelling their eyes. The note continued:

“The Government will continue to defend the remainder of the reduced rate.”

Will the Minister update the Committee on what that defence will be and where we are with it? I appreciate the limitations on sharing legal advice to the Government, but if he updated us as much as possible on the legal position that would be helpful—

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.