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The Green Deal: All you need to know

All the facts you need to know about the UK government's proposed Green Deal and how Europe could upset it.

The Green Deal has been motioned by the UK government and would see funding channelled into promoting energy-efficient homes. That said, the EU ruled that an Austrian homeowner was entitled to register for VAT and therefore reclaim the tax paid on the cost of installing solar panels on the roof of his home. It determined that the homeowner was 'in business', generating electricity and selling back to the state grid.

The UK government could now be forced to rethink its strategy of funding its incentive scheme as it faces potentially having to pay out £150 million of VAT claims from the estimated 250,000 households who have already installed solar panels. It could also have major cost implications for the government’s plan to have up to four million homes generating solar power by 2020.

Just as important for the UK government’s flagship green energy policy, the EU ruling also reinforced a threat to a  reduced VAT rate for energy-saving materials. Earlier this year the European Commission challenged the 5 per cent VAT rate as a breach of EU rules. So far the UK government has defended the reduced VAT rate with a European Court ruling deemed unlikely before the end of 2015.

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