Partner Article

VAT windfall on energy costs should be passed to the consumer

Another winter, another choice for pensioners and the poorest in society to determine whether they’ll have to cut their food costs to cover the cost of heating.

Meanwhile HM Treasury will receive a VAT windfall as a result of proposed increased gas and electricity costs.

While politicians argue about ‘price freezes’, ‘increased competition’ and ‘switching suppliers’, many households face a ‘heat or eat’ trade-off, cutting back on food to finance the additional cost of keeping warm during cold snaps.

In similar behavioural patterns, many charities, when faced with higher operating costs, will cut back on other (often VAT zero-rated) expenditure, or may have to rely on grants, donations or legacies to meet increased overheads, thereby reducing the funds available to carry out their charitable objectives.

While the political parties disagree on how to tackle rising bills, the decision by SSE to put their prices up by 8% will affect about 4.4 million domestic electricity customers and 2.9 million domestic gas customers. This price hike, likely to be followed by other suppliers, will result in a VAT windfall to the Treasury as VAT applied to domestic fuel bills cannot be recovered by the individuals bearing the cost.

Wouldn’t it be welcome news if, rather than political party point-scoring, HM Treasury made a real impact to consumers by diverting any VAT windfall to those directly affected by energy price increases?

This was posted in Bdaily's Members' News section by Baker Tilly .