VAT and business rate reliefs for green investments welcomed, but an overall strategy is still lacking

24 March, 2022

The Association of Taxation Technicians (ATT) and Chartered Institute of Taxation (CIOT) have welcomed the commitment by the government to use the tax system to encourage investment in green technologies, but called on ministers to commit to a long-term tax strategy for green investment.

Yesterday’s Spring Statement confirmed that the VAT rate on energy-saving materials – such as solar panels, wind and water turbines – installed in domestic properties will be reduced from 5 per cent to zero between 1 April 2022 and 31 March 20271.

It was also confirmed at the Spring Statement that the implementation date for green reliefs from Non-Domestic (Business) Rates will be brought forward a year to this April2.

These measures will give taxpayers and businesses some incentive to continue to invest in green energy technologies at a time when cost of living pressures are taking priority over the need to reduce carbon emissions.

However, the VAT reliefs are temporary, and there remains uncertainty over the Government’s long-term approach to using the tax system to encourage green investment.

In October last year, the CIOT published a Climate Change Tax Policy Roadmap, in which it called on the government to deliver a long-term approach to taxation and climate change3.

Jason Collins, chair of the CIOT/ATT Climate Change Working Group, said:

“This temporary VAT cut – alongside other measures to lower the cost of investing in energy-saving technologies is welcome, but what is still missing from the government is an overall strategy for using the tax system to encourage green investment.

“A longer-term approach to taxation and climate change would send a signal to businesses and taxpayers that they can plan ahead with confidence and certainty. Otherwise, government interventions will seem piecemeal, rather than strategic”.

On the announcement that the implementation date for green reliefs from business rates is to be brought forward to April 2022 from April 2023, Jason Collins added:

“These reliefs will help encourage businesses to continue investing in green energy technologies. There had been concern that companies already in the process of preparing this investment would put their projects on hold until the relief took effect, but this announcement should provide them with the confidence to press ahead with their investment plans”.

Notes for editors

  1. The scheme will not apply in Northern Ireland, although the Northern Ireland Executive will receive a corresponding adjustment to the Barnett Formula providing additional funding.
  2. Chartered Institute of Taxation comments on green tax proposals (CIOT Press Release, 27 October 2021)
  3. See Tax professionals set out case for a climate change tax roadmap (CIOT Press Release, 21 October 2021)