Reduced VAT rate ― supplies of energy saving materials

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Reduced VAT rate ― supplies of energy saving materials
  • Energy saving materials
  • Changes with effect from 1 October 2019
  • What is residential accommodation and relevant charitable use?
  • What energy saving products are included?
  • What constitutes ‘installation’?
  • Grant funded installations of heating equipment
  • Who is a qualifying person?
  • Installation of energy saving materials ― proposed changes to UK legislation
  • Grant funded schemes
  • Supplies via leasing companies
  • Security goods
  • Examples of mixed supplies

Businesses involved with advising contractors or subcontractors installing energy saving materials, grant funded heating equipment or security goods will find this guidance note of particular interest as it outlines the main rules regarding the supply of installed qualifying goods at the reduced VAT rate.

2006/112/EC , Annex III point 10; VATA 1994, Sch 7A, Group 2; VAT Notice 708/6 
Energy saving materials

In order to determine whether the supply will be liable to VAT at the reduced rate, the following questions need to be answered:

  • are the energy saving materials going to be installed in existing residential accommodation? (a building used for a relevant charitable purpose no longer applies since 1 August 2013)
  • do the materials to be installed qualify for the reduced VAT rate? Full details of the materials included within the reduced VAT rate are below
  • are the materials installed by the person supplying the energy saving materials?

VENSAV3000; VATA 1994, Sch 7A, Group 2, Note 1(a)–(k)

Note thatif these items are installed in a new dwelling, the installed materials will most likely be zero-rated as part of a new construction of a zero-rated dwelling. See the Zero-rating the construction of a new building and Supplies of building materials guidance notes.

Changes with effect from 1 October 2019

Draft legislation has been published thatwill limit the scope of the reduced rate for energy saving materials installed in residential homes in order to make it consistent with EU law. With effect from 1 October 2019 (subject to the legislation being enacted by Parliament) the following changes will be implemented:

The Value Added Tax (Reduced Rate) (Energy-Saving Materials) Order 2019 (SI 2019/958) 

Group 2 of Schedule 7A (charge at reduced rate: installation

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