And finally... is there a threat of VAT increases by the back door?

16 July 2015

Ian Carpenter

The Queen’s Speech stated that there would be legislation to 'Ensure there are no rises in VAT rates…Ensure there will be no extension to the scope of VAT'.

So it is welcome that the one and only VAT clause in the Summer Finance Bill provides that the current standard and reduced rates of VAT will not rise, and that the relevant VAT provisions will be locked to prevent there being any decrease to the scope of the VAT at the zero rate and reduced rate during the full term of the next Parliament.

We see however, in the Notes accompanying the Finance Bill, that the clause will not prevent a change to the scope of VAT being made by primary legislation; specifically that such a change may be applicable following a Court or tribunal decision or in response to infraction by the EU Commission.

It would therefore appear that, following the UK’s recent defeat before the European VAT Court, there does remain scope for HMRC to extend the standard rate of VAT to the installation of energy-saving materials.