Following on from Arti Sonpal’s VAT Question of the Week, https://www.cronertaxwise.com/community/my-vip-tax-team-vat-question-of-the-week-energy-saving-materials/, the supply and installation of ESM in domestic properties is now zero-rated for VAT purposes for the next 5 years in Great Britain. This removes the social policy conditions and the 60% materials to labour test. This does not apply in Northern Ireland where the aforementioned tests would still apply.
HMRC’s own internal manual, VENSAV3310 (not yet updated and still referring to the reduced-rate) states: “The reduced rate applies to the supply and installation of energy-saving materials in residential accommodation. Hence the reduced rate will apply if energy-saving materials such as solar panels, are installed:
- primarily to serve residential accommodation, but also to serve an indoor swimming pool; or
- primarily to serve residential accommodation, but also to serve an outdoor swimming pool.
The reduced rate does not apply if the energy-saving materials are installed exclusively to serve an indoor or outdoor swimming pool.”
HMRC acknowledge swimming pools do form part of residential property. The question now remains whether the installation of ESM would be to service solely the pool or to provide energy for the dwelling as a whole.
If the installation is to serve the residential property including any swimming pools, this would be a zero-rated supply. If this is not the case, the supply would be standard rated at 20%.
The new rules can be found in the following link: https://www.gov.uk/government/publications/changes-to-the-vat-treatment-of-the-installation-of-energy-saving-materials-in-in-great-britain/the-value-added-tax-installation-of-energy-saving-materials-order-2022.
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