VQOTW: VAT Green Reliefs

Following recent government publicity regarding the provision of grants to encourage householders to make their homes more energy efficient; together with concerns about potential risks to the gas supply and rising costs means clients are increasingly interested in whether there are any VAT reliefs available. Please could you clarify?

The reduced rate of VAT at 5% for the installation of certain energy saving materials (ESMs) in residential accommodation was first introduced in 1998 and the provision has been extended and revised over the subsequent years. Details of the current treatment can be found in Notice 708/6 https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086.

The latest amendments in October 2019 were prompted by infraction proceedings undertaken against the UK by the European Commission in 2015, concerning the UK application of the reduced rate. In those pre-Brexit times, the UK was required to comply with the CJEU’s judgment and amended the UK legislation that makes provision for the reduced rate for ESMs.

The revised legislation took effect from 1 October 2019. Wind and water turbines were removed from the list of qualifying items. Solar panels, ground and air source heat pumps, and micro heat and power units remain qualifying if the conditions outlined below are met.

Installation services on their own are subject to the 5% reduced rate. However, installation services together with listed materials qualify for 5% VAT in the following circumstances:

  1. the customer is over 60 or in receipt of certain benefits;
  2. the customer is a registered housing association, or
  3. the building is a ‘relevant residential’ building, such as a care home.

The reduced rate also applies to supplies made to persons living in dwellings who are not qualifying persons, but where the value of the materials exceeds 60% of the total value of supplying and installing the goods, the reduced rate is restricted to the labour element of the supply, and the materials or hardware are standard-rated.

It remains to be seen whether the relief will be revised again especially given the current high profile of the green agenda.

Remember, members of our VIP Tax Team service can call our priority advice line for instant help with tax, VAT and employment queries such as this.

To unlock your access to the advice line, plus tax & VAT consultancy support, monthly eCPD modules, in-depth webinars and more, call 0800 231 5199 or book your free My VIP Tax Team consultation now.

Please share this article with your clients

Our team of expert consultants have a wealth of experience and can also provide a written consultancy service to support your practice, like having your very own tax and VAT department.

Why not see what My VIP Tax Team can do for your practice, call 0800 231 5199 or vip@cronertaxwise.com to find out more.

Back to Community

VAT Advice Consultant
0844 892 2470

Sally is the Team Leader of the VAT Advice and Consultancy team at Croner Taxwise. She has worked in VAT since 1990, including eight years spent with HMRC, both as an Assurance and Enquiries Officer involved in presenting seminars and business education. Since joining private practice in 1999, Sally has specialised in providing VAT technical advice to a variety of clients, ranging from small one-man bands to large multi-national corporations, on the full range of VAT technical matters.

My VIP Tax Team VAT question of the week: VAT position on supplies of digital services
My VIP Tax Team VAT question of the week: Reverse Charge: Purchases of Services from Overseas Suppliers
My VIP Tax Team VAT question of the week: Flat rate scheme interaction with the domestic reverse charge for construction