VAT Energy Saving Materials Zero Rated

2.1 Reduced-rated and zero-rated installations

From 1 April 2022 until 31 March 2027 a zero rate applies to the installation of certain specified energy-saving materials (read paragraph 2.9) in, or in the curtilage, of residential accommodation in Great Britain (read paragraph 2.20). Neither the social conditions test, nor the 60% test detailed in paragraph 2.4 will need to be applied.

 

2.2 Installation

Installation, in this context, means putting in place energy-saving materials.

This involves some process by which materials are permanently fixed in place, although loft insulation may simply need to be unrolled and positioned in place to be installed.

 

2.6 New rules for installation of energy saving materials in Great Britain

The new rules effective from 1 April 2022 in Great Britain remove both the social conditions test and the 60% test for all installations of qualifying energy-saving materials in England, Scotland and Wales.

They also introduce a temporary zero rate on all installations of qualifying energy-saving materials that are made on or after 1 April 2022 up to and including 31 March 2027.

On 1 April 2027 the installation of qualifying energy-saving materials in Great Britain will revert to the reduced rate of 5%.

2.9 Energy-saving materials covered by the reduced rate in Northern Ireland

Subject to one of the social policy conditions being satisfied or the 60% threshold not being exceeded, the reduced rate applies to the installation of the following energy-saving materials:

  • controls for central heating and hot water systems (read paragraph 2.10)
  • draught stripping (read paragraph 2.11)
  • insulation (read paragraph 2.12)
  • solar panels (read paragraph 2.13)
  • ground source heat pumps (read paragraph 2.17)
  • air source heat pumps (read paragraph 2.18)
  • micro combined heat and power units (read paragraph 2.19)
  • wood-fuelled boilers (read paragraph 2.20)

2.10 Energy-saving materials covered by the zero rate in Great Britain

The zero rate applies to the installation of the following energy-saving materials:

  • all energy-saving materials as listed in 2.9
  • wind turbines (read paragraph 2.15)
  • water turbines (read paragraph 2.16)

2.11 Controls for central heating and hot water systems

Central heating and hot water system controls include:

  • manual or electronic timers
  • thermostats
  • mechanical or electronic valves, including thermostatic radiator valves

2.18 Air source heat pumps

Air source heat pumps use the air as a source of heat. They absorb heat from the outside or surrounding air and transfer that into useable heat in the home for space or water heating, or both.

Fixed air source heat pumps can be reversed so that they can draw heat from inside a building, thus providing cooling during the summer as well as indoor heating for colder periods of the year.

Only air source heat pumps that are permanently fixed and are not portable or moveable qualify as energy-saving materials.

HMRC’s understanding is that most air conditioning units are air source heat pumps. However, in cases of doubt, deciding whether any particular product is to be treated as an air source heat pump will depend on the facts of each case.

 

Appendix

source: https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086#overview

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