Zero VAT on energy-saving materials

The installation of some specified ESMs in residential accommodation is now zero rated for VAT, a change that took effect on 1 February 2024. 

Which materials does this apply to?

Previously, the more common ESMs included:

  • controls for central heating.

  • draught stripping.

  • insulation.

  • solar panels.

  • ground-and air-source heat pumps.

  • micro combined heat/power units and wood-fuelled boilers.

  • wind and water turbines.

From 1 February 2024 this list has been extended to include:

  • batteries.

  • water-source heat pumps.

  • diverters retrofitted to existing ESMs such as solar panel or wind turbine systems.

  • heat pump groundworks that are integral to the installation of a ground-source heat pump.

Some factors to be aware of

The zero rate only applies to the installation of ESMs. This means that where materials are only purchased – not installed – the standard rate of VAT will be applied.

A charity qualifies for the zero rating, where the property concerned is used for charitable, non-business activity. What is or is not charitable, non-business activity can be difficult to determine. As an example, village halls or similar are often able to benefit from the relief.

The installation of ESMs may require supplementary work or supplies and these can also be zero-rated.

If you have recently installed new ESMs, speak to our experts about your VAT position.

 
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