The Court of Appeal (CoA) has upheld the decision of both lower tax tribunals by finding that insulated roof panels are not insulation for roofs.
The reduced rate of VAT can be applied to supplies of ‘insulation for roofs’ as part of the group of supplies related to energy-saving materials. This VAT reduction also applies to draught stripping for windows and doors along with solar panels, wind turbines and heat pumps (both air and ground). As most consumers of these products will be individual households any VAT will be an extra burden on the consumer. Where products can qualify for the reduced rate then they will be more attractive.
A couple of similar cases had gone through the lower tribunals with both ending at the Upper Tribunal and this was the first time this area of VAT legislation had been reviewed by the CoA. The CoA found that the lower tribunals, while arriving at the correct decisions, had erred in law slightly by using slightly convoluted tests to see whether the supplies came within the categories for reduced VAT. The CoA held that the test was simply whether the insulating panels were insulation for roofs or not. The lower tribunals had formulated a test that was whether the insulating panels were for roofs or the roof itself.
The insulating panels were weather protected and would form a new roof and could not be considered insulation for roofs as they ended up being the roofs themselves.
The taxpayer will have to pay the difference between the VAT collected at the reduced rate and the VAT that should have been collected at the standard rate.
The decision can be found at: Greenspace (UK) Ltd v The Commissioners for HMRC – Find case law (nationalarchives.gov.uk)
Please contact us if you have any questions on VAT or make outside of the scope, exempt, reduced or taxable supplies. We can help with compliance and planning. Errors with VAT can be costly as the company supplying the insulated panels will now have to find the outstanding VAT from its resources with no likely recourse to its customers.
