Flowgroup hit by EU ruling on VAT rates for energy efficient products
Flowgroup (AIM: FLOW), the AIM listed developed and retailer of alternative energy efficient products, has today announced that is expecting a substantial reduction in the number of boiler installations for 2015. This follows a ruling by the European Court of Justice on 4th June that the UK's reduced 5% rate of VAT on energy-saving products is in breach of EU laws, meaning it is likely that customers installing the Flowgroup boiler will not benefit from the 5% reduction in tax. This is not good news for the company and the repercussions of this ruling will not only impact the likelihood of customers wishing to install the boilers but also makes the ‘Boiler that pays for itself’ model, non-viable without changes to the pricing structure.
Although the UK Government are yet to clarify their ongoing position, it is likely that customers of Flowgroup’s boilers will no longer benefit from the 5% reduction of VAT. Therefore, in order to ensure customers remain unaffected by any potential increase in VAT and in order to maintain the long-term viability of the ‘Boiler than pays for itself’ model, the company has decided to focus on its cost reduction programme. In the short term it is expected this will result in a substantial reduction in boiler installations for the remainder of 2015. In the short term customers might have to…