Tax and VAT Environmental, social, governance (ESG)

CFG responds to HMRC consultation on VAT relief

CFG calls on government to reinstate VAT energy saving materials relief following member consultation.

Following a survey of member charities, Charity Finance Group has responded to the government's recent consultation on VAT energy saving materials (ESM) relief.

CFG is calling on government to reinstate the relief, arguing that additional support is crucial for charities if they are to meet their environmental obligations.

Richard Sagar, Head of Policy, CFG, comments: "At a time of persistent high inflation, stagnating income and increased demand for their services, any tax relief is to be welcome.

"We found that for many of our member charities, any additional financial incentive could encourage them to install ESMs that they otherwise wouldn’t. In other cases, it would speed up a charity's ability to install ESMs by reducing the amount of expenditure needed.

"By reinstating this relief, charities can focus more of their resources on providing public benefit and making a positive difference to their beneficiaries, whilst meeting environmental and energy saving objectives."

A survey of members indicated the vast majority of respondents were intending to install ESMs (84%) with controls for central heating and hot water systems, solar panels and insultation being the most popular measures.

Two thirds of respondents (75%) said that VAT relief was important in deciding whether or not to install energy saving measures.

Richard concludes: "For many charities this additional financial incentive might be the difference between installing such measures or not doing so. We look forward to HMRC responding to the consultation and ultimately the VAT relief being reinstated."

Background to the relief

Prior to August 2013, UK legislation provided a VAT relief for the installation of ESMs in a building intended for use solely for a relevant charitable purpose.

Discussions with the European Commission identified that the UK’s application of the ESM relief to charitable buildings was not compatible with EU law, and the relief was subsequently narrowed to exclude charitable buildings.

Since 2013, the relief has only applied to installations of qualifying materials in residential and domestic accommodation. Now that the UK has left the EU, the government can consider reinstating the relief to buildings used for a relevant charitable purpose.

More about the consultation.


For more information about CFG's policy work, please email the Policy Team.


« Back to all news