New EU directive is allowing member states to remove the charge for ‘supply and installation of solar panels’
The move, in the chancellor’s mini-budget – saving householders installing panels around £1,000 by removing the current 5 per cent rate – will also be allowed by the EU, they insist.
The row follows the Brexit-supporting Mr Sunak arguing that a 2019 ruling by the European Court of Justice would have prevented him from acting within the bloc.
“Thanks to Brexit, we’re no longer constrained by EU law,” he told cheering Tory MPs, adding: “We’ll abolish all the red tape imposed on us by the EU.”
Jacob Rees-Mogg then backed up the claim, tweeting after Wednesday’s spring statement: “The EU would not allow us to do this, another benefit of Brexit.”
But it has emerged that a directive, put forward by the European Council last December, is extending the current “exemption” from VAT for food, medicines and public transport.
The new list includes the “supply and installation of solar panels on and adjacent to private dwellings, housing and public and other buildings used for activities in the public interest”, the document states.
Steve Peers, a Brexit expert and law professor at the University of Essex, said of Mr Sunak’s comments: “This is untrue.
“A recently agreed amendment to EU VAT law will give member states an option for a VAT exemption for the supply and installation of solar panels.”
And the QC Jessica Simor, a specialist in EU law, said the directive will allow a VAT rate “as low as zero”, adding: “Parliament has agreed it. Council now has to rubber stamp it.”
Ministers have repeatedly made questionable claims about changes being introduced in their search for the “Brexit dividend” that voters were promised.
Mr Sunak has wrongly argued that tax-cutting freeports are only possible outside the EU, despite seven existing in the UK between the mid-1980s and 2012.
The Treasury has been asked to respond to the criticism that Mr Sunak misrepresented his new freedoms to act on green home energy improvements.
In his speech, on Wednesday, the chancellor said: “If homeowners want to install energy saving materials, at the moment only some items qualify for a 5 per cent VAT relief – and there are complex rules about who is eligible.
“The relief used to be more generous, but from 2019 the European Court of Justice required us to restrict its eligibility. But, thanks to Brexit, we’re no longer constrained by EU law.”
Green campaigners welcomed the VAT removal, also making heat pumps and loft insulation cheaper, but there was no other help to cut insulation or green energy bills.
Meanwhile, the mini-budget supported fossil fuels with a 5p cut in fuel duty and the chancellor failed even to mention the term “net zero” in his speech.