VQOTW: Energy Saving Materials & Swimming Pools
My client supplies and installs a range of energy saving materials (ESM) in domestic settings. They have had an influx of work from consumers who have swimming pools; which might be located in the confines of their homes or outside in the garden. Swimming pools consume large amounts of energy and homeowners are looking to take advantage of the zero rating for ESM from 1st April 2022. Can the client zero rate the installation of solar panels or air and ground source heat pumps to provide energy for a swimming pool?

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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