The zero rate of VAT has been extended to include the installation of additional energy-saving materials (ESMs) from 1 February 2024.
The installation of certain specified energy-saving materials (ESMs) in residential accommodation is zero rated for VAT. The more common ESMs include:
- Controls for central heating.
- Draught stripping.
- Insulation.
- Solar panels.
- Ground-and Air-source heat pumps.
- Micro combined heat/power units and wood-fuelled boilers; and
- Wind and water turbines.
From 1 February 2024 that list has been extended to include:
- batteries.
- water-source heat pumps.
- diverters retrofitted to existing ESMs such as solar panel or wind turbine systems; and
- heat pump groundworks that are integral to the installation of a ground-source heat pump.
The zero rate applies to the installation of ESMs, so where materials are only purchased – not installed – they will be standard-rated.
A charity qualifies for the zero rating where the property in which the installations take place is used for charitable non-business activity. What is or is not charitable non-business activity can be difficult to determine but village halls or similar are often capable of attracting the relief.
The installation of ESMs may require ancillary works or supplies, and these can also be zero-rated.
If you have recently installed new ESMs, speak to us about your VAT position.