Representatives from environmental organisations, builders, solar companies and energy groups are asking the Chancellor to help people struggling with historically high energy bills by removing VAT on domestic energy efficiency measures and zero carbon technologies.

The group delivered the ‘Making Zero Carbon = Zero VAT’ report to Treasury officials using dispatch-style boxes. It calls for the up to 20% tax to be zero rated for home energy efficiency improvements and domestic renewables, such as heat pumps, to reduce home heating costs and carbon emissions.

The report, commissioned by the MCS Charitable Foundation, highlights how VAT is a major barrier to retrofitting the UK’s 29 million existing homes and helping reach net zero targets.

David Cowdrey, Director of External Affairs of MCS Foundation, said: “Cutting VAT on energy efficiency measures and domestic renewables will help reduce the cost of insulating homes and installing zero carbon heating options. This is vital at a time when energy costs are at a record high and a sharp rise in the price cap, coming in April, leaves a bleak future for those struggling to heat their houses.

“Current government policies fall short of meeting 2050 emissions targets, but taking action on VAT will make installing energy efficiency measures more affordable. It also sends a clear signal of support to businesses as the low carbon heating sector will create tens of thousands of skilled, green, jobs. Energy efficiency needs to be made a priority.”

The report, by independent tax experts Tait Walker, shows how positive tax incentives could be used by the government to decarbonise homes through energy efficiency measures, including domestic renewables and eco-retrofitting. Compared to EU countries, where incentives have led to increased take up of heat pumps and other energy efficiency measures, 70% of UK-owned homes are not eligible for any energy saving grants. The government needs to use a broad based positive tax incentive, like targeted VAT reductions, to provide vital additional support to help insulate the millions of homes across the UK, help keep people warm and reduce fuel bills.

The report publication comes ahead of the Chancellor’s Spring Statement on 23rd March.

Heating is currently responsible for 23% of all UK carbon emissions, with gas boilers making up to 80% of domestic heating. The cost of heating homes using low carbon heating technologies with good insulation is significantly lower than gas, with recent analysis by the Regulatory Assistance Project (RAP) showing that insulation and home improvements could halve future energy bills.Jo Williamson, Member Manager of the National Energy Foundation, said: “Homeowners now, more than ever, understand the impact of their property on the health of the planet, but to create the important change that’s needed to reduce carbon emissions and live more sustainably they need a helping hand.

 “We have seen a 300% rise in members to our SuperHomes retrofit network over the last month as residents everywhere are dealing with the realities of rising fuel costs and are wanting to put a stop to over-reliance on unsustainable fossil fuels. That’s why we are backing this initiative all the way to reduce or abolish VAT on energy efficient refurbishments”

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: “If the UK Government is serious about delivering zero carbon it needs to tackle our existing homes which contribute over 20% of the country’s carbon emissions. Cutting VAT to zero for retrofit measures would be the single best tax incentive to encourage more householders to make their homes greener. The Making Zero Carbon = Zero VAT report is an important call for the government to act. It backs up established calls from the FMB and small builders to #CutTheVAT. Not only will zero rating energy efficiency measures help tackle climate change, it will also unlock growth and jobs and help to level up.”

David Cowdrey added: “Following Brexit the government has autonomy over VAT, but they are not exercising this power. The financial loss to the Treasury would be minimal, but the ripple effect of such positive action would be far reaching. Now is the time for a targeted VAT reduction on energy efficiency measures and domestic renewables.”

The report ‘Making Zero Carbon = Zero VAT’ was commissioned from independent Tax experts, Tait Walker. To download a copy of the report click here.