Tax payments could mean cuts in energy efficiency programmes
Sun 30 July 2006
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A tax ruling by HM Revenue and Customs means that funding for domestic energy efficiency programmes may have to be cut.
The Energy Saving Trust (EST), the leading delivery body for these programmes, has been told by HM Revenue and Customs (HMRC) that VAT must now be paid on goods and services bought in relation to the provision of grants. The HMRC's decision reverses an earlier ruling. The EST has received a £5m bill to cover VAT payments that HMRC has calculated are due since April 2006.
In a statement HMRC said: "Longstanding VAT rules mean grants paid to fund bodies providing services for the wider public good are not liable to VAT.
"However, VAT still has to be paid on goods and services purchased by such bodies."
The Energy Saving Trust believes this will have a direct impact on the services it delivers.
EST's Chairman Edward Hyams told the BBC: "We collect about £25m that we spend on energy efficiency measures and reducing carbon, and we will now take about £5m of those and return it back to the Treasury.
"And that will have to result in a reduction in programmes and a reduction in activity unless the situation changes."
The Energy Saving Trust has appealed against the decision but is already having to cut back on planned activities because it cannot risk waiting until an appeal is considered. The EST says that it is having to terminate activities that would have contributed to a reduction of one million tonnes of carbon in terms of lifetime emissions.
Peter Ainsworth, the Shadow Environment Secretary, told the BBC: "Unless this matter is resolved urgently, the Treasury is in danger of trashing Defra's efforts to control carbon emissions."
Liberal Democrat Trade and Industry Spokesman Ed Davey said: "Energy efficiency is the quickest, cheapest and most effective way to meet Britain's energy needs and cut carbon emissions, so it is utter madness that the government is slashing the Energy Saving Trust's budget".
Related Links
BBC news story link
EST website
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