As announced in the Chancellor’s spring statement, effective from 1st April 2022 the VAT liability of certain energy saving materials will be cut from the previously applicable rate of 5% to the zero-rate – supplies covered by this change will revert to the reduced rate as of 1st April 2027.

As a result of this new measure, the limitations that were previously applicable to the installation of energy saving materials in residential accommodation, i.e., the relevant social policy conditions being satisfied or the ‘60% test’ being met, no longer apply.

Whilst the scope of this change will be relatively broad (a further effect of the Chancellor’s statement is that the VAT treatment of wind and water turbines has fallen in line with other energy saving materials, where this was previously not the case), those involved in supplying goods of this nature should confirm whether these qualify under the new provisions prior to charging the zero-rate.

This change does not apply to installations carried out in Northern Ireland, where VAT treatment remains unaffected.

If you or your client are supply/install energy saving materials and are unsure how this new change will impact your business, please contact one of our consultants through our free VAT helpline for expert advice.

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