No soft ride for energy efficiency

United Kingdom

In previous articles we have commented that whilst the courts are handling an increasingly diverse range of environment related cases, they are not prone to giving such cases an easier ride just because they may have environment related credentials. The case below is another example of this. It relates to a claim that certain roofing materials were energy saving and therefore ought to attract reduced rate value added tax (“VAT”).

Is it a roof or material for a roof?

HM Revenue & Customs (“HMRC”) successfully appealed to the Upper Tier Tax Tribunal in the case of The Commissioners of HMRC v. Wetheralds Construction Limited (2018 UKUT 0173) (“Wetheralds”). This case revisits and reinforces an earlier decision (in 2014) of the Upper Tier Tax Tribunal, in Revenue & Customs Commissioners v. Pinevale Limited (2014 UKUT 2003) (“Pinevale”).

The taxpayer in Wetheralds supplied an insulated roofing system designed to replace relatively thermally inefficient transparent conservatory roofs.  This system could be broken down into four elements, being (i) insulating material, (ii) tiles, (iii) a plasterboard ceiling, and (iv) soffits and guttering.  Group 2 of Schedule 7A Value Added Tax Act 1994 extends the reduced VAT rate of 5% to supplies of “energy saving materials”.  In particular, Item 1(a) of Group 2 extends reduced rating to “insulation for…roofs”.

In Pinevale, the taxpayer supplied insulated panels designed to replace glazed conservatory roofs.  The Upper Tier Tax Tribunal decided that as the products in question formed an entire roof, rather than insulation for a roof, supplies of the panels should be standard rated for VAT purposes.  When Wetheralds was decided by the First Tier Tax Tribunal, the judge felt that the facts could be distinguished from those considered in the case of Pinevale, as before considering Pinevale, it was necessary to decide whether or not supplies of the four elements noted above constituted a composite supply for VAT purposes, which would then take on the VAT characterisation of the predominant supply.  Taking this approach, he decided that Wetheralds supplies were composite supplies, and as the predominant element was element (i) above (insulating material), the reduced rate should be applied to supplies of the roofing system. 

HMRC appealed to the Upper Tier Tax Tribunal which held in favour of HMRC. The Upper Tier Tax Tribunal decided that the judge in the First Tier Tax Tribunal had erred in his approach and should have first considered the application of Pinevale.  When they considered the application of Pinevale, they took into account Wetheralds marketing material, which had referred to the system as a “fully insulated tiled roof” and “your new roof”.  Taking this into account, they found that the supplies made by Wetheralds were supplies of insulated roofs, as opposed to supplies of “insulation…for roofs” and accordingly, their supplies should be standard rated rather than having the reduced rate applied.


It is heartening to see that environment considerations are becoming so “grown up” that they pop up in so many facets of everyday commerce and life. It is equally heartening that as they advance onto Main Street they are treated as grown up, and subjected to the same level of factual and legislative scrutiny, as other commercial issues.