The European Commission said on Thursday it had told Britain to amend legislation that allows a lower rate of tax (VAT) on "energy-saving materials”, or face being taken to the European Union's highest court.
Britain's discount VAT rate on such goods breached EU legislation, the Commission said in a statement.
"Under EU VAT rules, member states can only apply reduced VAT rates to a limited number of goods and services,” it said, adding that those did not include the supply and installation of energy-saving materials.
The Commission gave Britain two months to bring its legislation into line, or be sued in the EU Court of Justice.
Britain applies a lower rate of VAT on the supply and installation of solar panels, wind and water turbines, controls for heating and hot water systems, as well as insulation, among other materials.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.