Which energy saving measures qualify for lower VAT rates?
Posted by Colin Lothian on 1 March 2013 at 9:12 am
Q. I have had an air pump system installed by Ice Energy, very helpful and efficient company. However, to meet the radiator specifications I had to change all my radiators for larger ones. Ice Energy do not supply radiators so I had to buy locally. This did not qualify for the reduced VAT for energy saving materials, so have paid out over £500 in VAT and can apparently not recoup this outlay. I am wondering if this topic has been explored and whether there is any solution?
A. According to the HMRC, Installation of any of the following qualifies for the lower rate of VAT:
• Controls for central heating and hot water systems
• Draught insulation (e.g. around windows and doors)
• Insulation on walls, floors, ceilings, lofts, etc
• Solar panels
• Wind turbines
• Water turbines
• Ground-source heat pumps
• Air-source heat pumps
• Micro combined heat and power units
• Wood-fuelled boilers
You can only get these lower rates if the energy saving materials are actually installed, and the work is done on your home. You'll be charged the lower rate on the installation work itself as well as the materials.
You'll also get the lower rate on any necessary extra work that needs to be done as part of the installation - this doesn't apply if you're having them installed as part of a larger project such as building a new roof or an extension, or installing a central heating system.
Which energy sabing measures do NOT qualify for reduced VAT rate?
You can't get the lower rate of VAT on all energy saving materials and equipment. The following aren't covered by the scheme:
• Energy efficient boilers
• Secondary or double glazing
• Low emission glass
• Energy efficient fridge freezers
• Materials and equipment that you buy without having them installed
However, you may be able to get a grant towards the cost of installing energy saving equipment, some of which then becomes eligible for the lower rate of VAT. See HMRC notice 708/6 please.
The only solution would seem to be for the installer to have purchased the radiators as part and parcel of the initial installation of energy saving qualifying installations as shown above.
About the author: Colin, a Chartered Tax Adviser and works at The Fry Group as Business Tax Manager.
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