The Court of Justice of the European Union has banned the UK from reducing the rate of VAT on the supply and installation of energy-saving materials.

EU directives allow governments to reduce tax on the supply of energy-saving goods and services “as part of a social policy“.

The UK government believed that a tax break initiative intended to produce positive “social effects” would satisfy European regulations, but the CJEU ruled that pretty much the only way insulation can provide for “reasons of principally social interest” is if is installed in “social housing“.

The CJEU therefore today found in favour of the European Commission, who had brought infringement proceedings against the UK.

So we have to tax an industry if it intends to prevent an old lady from freezing to death, but it’s fine to waive the tax if the service is provided as a handout. When will this madness end?