EC threatens legal action over energy VAT
The European Commission may take legal action against the UK government because its reduced rate of VAT, 5% for the supply and installation of energy-saving materials including loft insulation and solar panels, breaches European Union legislation.
Member states are entitled to apply reduced VAT rates only to a limited number of goods and services, which are listed in Annex III of the VAT Directive. However, this list does not include the supply and installation of "energy-saving materials", according to the commission.
If the UK government does not amend its legislation in two months the commission said that it may take legal action in the European Court of Justice.