The VAT Liability of Installation of Energy Saving Materials

Currently, the supply of installing energy saving materials such as solar panels, insulation and wind turbines attracts the reduced rate of VAT (5%) if made by installers and the supply is provided in relation to ‘residential accommodation’ or in a building intended for ‘use solely for a relevant charitable purpose’.

However, The European Court of Justice has ruled that this relief is in breach of EU laws and the United Kingdom could face penalties if the VAT liability does not change.

It is therefore expected that, as a direct outcome of this case, the VAT rate for the installation of energy saving materials will be subject to the standard rate of 20% at some point in the future.  However, any VAT increase would not have retrospective effect and would thus not affect anyone who has already ordered the installation of such materials.

Alternatively, it is possible that HMRC will seek to instead categorise energy saving products so that they qualify under Group 7 of Schedule 7A VATA 1994 – Residential Renovations & Alterations. Supplies which fall into this category are also charged at the reduced-rate of VAT.

If you have any concerns that supplies you provide may be affected by this ruling, please call our free helpline to discuss any queries you may have.

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