VAT rate changes for energy saving materials

VAT rate changes for energy saving materials are being introduced this Autumn, this will limit the scope of the reduced rate (5%) on some Energy Saving Materials (ESM). The changes affect the installation of wind and water turbines and limiting the reduced rate to the labour element where the value of materials is a significant element of the value of the work.

If you are a business involved in supplying and installing energy saving materials, these changes to the reduced VAT rate for energy saving materials may well affect you. If you are thinking of having turbines or energy saving materials installed you may be able to take action now, to retain the reduced rate that would otherwise be lost or limited.

WIND AND WATER TURBINES

The reduced rate will no longer apply to the installation of wind and water turbines.

OTHER SUPPLIES OF ESMS

(Excluding Wind and Water Turbines)

The VAT rate changes for energy saving materials won’t apply to the installation of ESMs in residential accommodation, where the reduced rate will remain fully available, when the supply is made to:

• a person who is aged 60 or over
• who is in receipt of certain benefits
• is a relevant housing association
• or where the residential accommodation is a building

or part of a building used solely for a relevant residential purpose

There are specific rules on what is a relevant residential purpose building but the following are examples of buildings which are likely to fall within this category:

• nursing and care homes
• hospices
• student halls of residence

In other cases, provided the value of the energy saving materials does not exceed 60% of the total value of the charge being made, the reduced rate will also apply to the full value of the supply and installation.

However if the value of the materials themselves exceeds 60% of value the reduced rate will only apply to the service
of installation, i.e. the labour element. The supply of goods would be subject to VAT at 20%.

These changes only apply to the service of installing ESMs.

If for example your supply is part of a larger contract it may be seen to be a supply of construction services and
different rules may apply.

DATE OF IMPLEMENTATION

The VAT rate changes for energy saving materials come into force on 1 October 2019.

However they do not apply if payment is made or a contract is entered into before 1 October 2019.

Read more about the VAT rate changes for energy saving materials here.

FURTHER ADVICE

If you would like to discuss your own position or require more information about the changes, please contact us.

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