Brussels, 04/06/2015 (Agence Europe) - The United Kingdom is failing to comply with the VAT directive (2006/112/EEC) by applying a reduced rate of VAT to the supply and installation of “energy-saving materials” with respect to housing, since the directive stipulates that this rate is reserved solely for transactions relating to social housing or services provided in the framework of social policy.
This is the position of the Court of Justice of the EU, in a judgment (C-161/14) returned on Thursday 4 June.
In its decision, the Court upholds the position of the European Commission, which took the view that “energy-saving materials” in the general housing sector did not fall under the supply and service categories provided for in Appendix III of the directive to which reduced VAT rates may be applied, specifically: “provision, construction, renovation and alteration of housing, as part of a social policy” and “renovation and repairing of private dwellings”.
In its judgment, the Court states first of all the British tax clearly does not comply with the restriction imposed in the first of these categories (transactions relating to social housing), as the application of a reduced rate of VAT on materials for housing, with no distinction on the basis of the categories of individuals who occupy the premises, cannot be considered as being of an essentially social nature.
The Court also upheld the Commission's exclusion of the possibility to apply a reduced rate of VAT in this case in the framework of the “renovation and repairing of private dwellings”, as the directive excludes this option “when the materials account for a significant part of the value of the service supplied”, as is the case here.
The Court's judgement was met with criticism by the British Conservatives in the European Parliament. Their leader, MEP Ashley Fox, said that the decision “defies common sense”. “People will be aghast when they see the EU on the one hand hectoring member states about carbon reduction while on the other handing down judgements like this”, he said. (Francesco Gariazzo)