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<p>At Spring Statement 2022, the Chancellor announced the expansion of the VAT relief
on the installation of energy saving materials (ESMs) to residential accommodation
in Great Britain.</p><p> </p><p>The changes reverse restrictions introduced in 2019
following a Court of Justice of the European Union ruling, including re-instating
wind and water turbines as qualifying materials, and removing complex eligibility
conditions. Further to this, qualifying installations, including ground and air source
heat pumps, will benefit from a VAT zero-rate until April 2027. Overall, this represents
an additional £280 million of support for investment in ESMs over the next 5 years.</p><p>
</p><p>The changes to the VAT treatment of ESMs announced at Spring Statement 2022
were brought in at pace to immediately support households to improve the energy efficiency
of their homes, bolstering the UK’s energy security and contributing to our transition
to Net-Zero.</p><p> </p><p>In order to accelerate take-up and prevent loss of investment,
the changes were brought in from 1 April 2022, 10 days after Spring Statement 2022.
A longer delay between announcement and implementation risked having an adverse effect
on the ESMs market, i.e. in anticipation of future relief business and consumers may
have otherwise delayed entering into a contract thereby causing a temporary stalling
effect in the market, and risking supply bottlenecks further down the line.</p><p>
</p><p>Evaluating the case for adding new technologies to the relief would require
careful consideration and consultation to ensure changes represent value for money
and would not have unintended behavioural effects, a process which would have delayed
making changes to immediately benefit the public.</p><p> </p><p>The Government keeps
all taxes under review and continues to welcome representations on how the tax system
can be improved. It is important that Government policy takes into account the pace
of technological development in the ESMs market and the changing policy context since
this particular relief was first introduced. That said, requests for further changes
should be viewed in the context of over £50 billion of requests for relief from VAT
received since the EU referendum. Such costs would have to be balanced by increased
taxes elsewhere, increased borrowing, or reductions in Government spending.</p>
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