HM Customs and Excise 18
                                                        17 March 1998


CHANCELLOR CUTS VAT TO HELP LESS WELL OFF KEEP WARM

40,000 additional households each year will keep warmer as a result of 
the Chancellor’s announcement today that VAT wiil be cut from 17 1/2 
per cent to 5 per cent on the installation of energy saving materials 
funded by certain Government grant schemes.

The Financial Secretary Dawn Primarolo said today:

I am determined that those on low incomes should benefit from lower cost 
energy saving material. The reduction in VAT will help a further 40,000 
homes keep warm for less.
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DETAILS

The reduced VAT rate will apply to the installation of the following 
products in the homes of the less well-off, when it is grant funded 
by schemes designed to help them:

  cavity wall insulation
  loft insulation
  insulation for hot water tanks
  insulation for pipes and other plumbing fittings
  draught proofing 
  heating controls 

The reduced rate of VAT will apply to the installation of these products 
to the extent where funded by schemes targeted to help pensioners and 
the less well-off. Examples of schemes involved are : 

  Home Energy Efficiency Scheme (HEES) and Domestic Energy Efficiency 
Scheme (DEES).
  Grant schemes equivalent to HEES and DEES operated by local authorities.

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NOTES FOR EDITORS

1.     The Chancellor announced his intention to apply a reduced VAT rate 
of 5 per cent to the installation of energy saving materials, when funded 
by grant schemes, in his Pre-Budget Report on 25 November 1997. A Customs 
and Excise report, ‘Helping the Less Well-Off Save Energy’, which examined 
the scope for a reduced rate of VAT for energy saving materials, was 
published at the same time. This report may be seen at the Customs Internet 
address.
  
2.     The new scheme goes as far as the Government can under current 
EC VAT rules, and relief will not apply to purchases for DIY installation. 
The Government is exploring with European partners the possibility of a 
wider relief for the supply of energy saving materials.

3.     The change, which is due to take effect from 1 July, will cost about 
10 million pounds in a full year. This is equivalent to an increase of over 
10 per cent in the budget for the existing Home Energy Efficiency Scheme. 
The change will be made by secondary legislation, which will shortly be 
exposed for comments. 

4.		Details for traders are available in Budget notice BN 63/98, 
which is available from Customs and Excise Business Advice Centres and from 
the Customs and Excise Internet site.



Press enquiries only to HM Customs and Excise, Public Relations Office, New 
King's Beam House, 22 Upper Ground, London, SE1 9PJ.  
Telephone:  0171 865 5468/5471

Others should contact their local VAT Business Advice Centre, listed under 
Customs and Excise in the telephone book.

Customs and Excise Internet address: 
http://www.open.gov.uk/customs/c&ehome.htm

This news release can also be found at :
http://www.hm-treasury.gov.uk. Other Treasury material can also be found at 
this address.