Reduced Rate VAT of 0% for installation of Heat Pumps and other "energy saving materials"

The reduced rate of 0% is now available for supplies of services of installing "energy saving materials", including heat pumps and solar panels from 1 April 2022 for five years.

Installation of any of the following energy saving materials in residential accommodation qualifies for the 0% rate of VAT:

  • air source heat pumps
  • ground source heat pumps (including ancillary supply like ground works)
  • solar panels (solar thermal and PV)
  • insulation for walls, floors, ceilings, roofs or lofts or for water tanks, pipes or other plumbing fittings
  • draught insulation (eg around windows and doors)
  • controls for central heating and hot water systems (including thermostatic radiator valves)
  • wind turbines
  • water turbines
  • micro combined heat and power units
  • wood-fuelled boilers

The 0% rate applies on any necessary extra work that needs to be done as part of the installation. For the installation of a ground source heat pump system this includes the heat pump, the ground loop, system controls and any other installation ancillary to the supply. Because a ground source heat pump installation generally provides heat at a lower temperature than a fossil fuel boiler there may be a need to increase the number or size of the radiators as part of the ancillary work or to install underfloor heating. See Heat Emitter Guide.

It is important that the invoice for the supply and install of these "Energy Saving Materials" only covers these "Energy Saving Materials". If it also covers other works, such as a new extension to an existing house, then the whole invoice is likely to be subject to 20% VAT.

If a heat pump is installed in a new build house, then the rate would be 0% – because the rate of 0% vat is applied to new builds, but not generally on work done on existing houses.

Reduced Rate VAT at 5% for Energy Saving Materials – up to 31 March 2022

Between 1 October 2019 and 31 March 2022 there had been a Reduced Rate of Vat of 5% on supply and install of "energy saving materials", but only in restricted circumstances. These circumstances were defined in HMRC VAT Notice 708/6 Energy-saving materials. The strict restrictions on availability (including age restrictions) were brought in to comply with European Court of Justice in 2019 (see VAT Order 2022 notice) but were lifted from 1 April 2022.

Boiler Upgrade Scheme

The Boiler Upgrade Scheme grant of £6,000 is available on the installation of ground source heat pump systems, and £5,000 for air source heat pump systems.

 

 

See Ten reasons for the UK to use ground source energy to reduce carbon emissions.

 

See Ground Source Heating          See Ground Source Cooling          See Ground Source Energy

 

 

Electfify Heat Campaign