November 29, 2021


There’s a VAT relief to encourage the installation of certain energy saving materials in residential properties. Among other things, the supply and installation of insulation for a roof can qualify for the 5% rate of VAT.

However, VAT reliefs are very strictly defined, and if you do not meet the exact conditions, no relief is available. This applies even if the work appears to fulfil the underlying policy objective, which in this case, is to encourage more energy efficient homes.

The recent Upper Tribunal decision in Greenspace (UK) Ltd illustrates this.

Greenspace specialises in improving the energy efficiency of pre-existing conservatory roofs. This is an area that has proved contentious in earlier cases. The law uses the wording “insulation for a roof” which HMRC insist must be interpreted strictly. Adding insulation to pre-existing roofs could qualify for relief; but a complete replacement of a roof, even with a much more efficient material, would be liable to 20% VAT.

Greenspace’s model was somewhere between the two. Most of the existing roof structure was retained, but Greenspace replaced the glass or polycarbonate panels with new panels. These were predominantly insulation, with a thin layer of weatherproofing material. The panels were not self-supporting, but were machined with a custom built tongue to simply slot into place between the existing struts and glazing bars without disturbing them. Everything else about the roof remains the same; gutters, rafter bars, jack rafters, rafter covers, cap, end caps and cresting.

The key question was whether removing existing panels and replacing them was: -

  1. the additional of insulation to an existing roof; or
  2. the supply of a new roof

HMRC argued successfully that the supply was of a new roof and did not qualify for the relief. This was so even though Greenspace did no work to the main structure of the roof, and thus would not guarantee that the new roof wouldn’t leak if there was an existing problem.

The Upper Tribunal recently refused to overturn the First Tier Tribunal’s decision that, on the facts, the supply was of a new roof. It accepted that the judgement hinged on “fine distinctions”.


Whether or not Greenspace will be in a position to lodge and win a further Appeal is not clear at this stage. This may be a particularly unfortunate case of a result hinging on “fine distinctions”. But the wider message is that the Courts routinely rule that reliefs from VAT must be interpreted strictly.

The Tribunal in Greenspace specifically concluded that form, not substance, was the relevant test in this case.

One final comment. The £2.5 million mentioned above was the amount HMRC had demanded (being VAT due at 20% less the 5% Greenspace had accounted for) for transactions in a 27 month period, and may have grown since. However, the case transcript also states that HMRC had withdrawn further Assessments for the previous 3 ½ years, on the basis that HMRC had made these out of time. A taxpayer receiving any Assessment from HMRC is advised to review whether the Assessment is validly made and issued within the correct time limits.


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