In accordance with Schedule 7A, Group 2 of the VAT Act 1994, the installation of certain energy saving materials within residential accommodation is liable to the reduced rate of VAT, as are the materials themselves when supplied alongside installation services.
However, some suppliers have attempted to extend the definition of energy saving materials to include damp proofing products such as creams, paints and gels that are applied to the exterior of residential premises. Therefore, HMRC have published a brief detailing its view of the correct VAT treatment of these damp proofing products.
In the view of HMRC, as the main purpose of the damp proofing products is to water-proof the surfaces on which they are applied, as opposed to improving thermal efficiency, coupled with the fact that they are 'applied' as opposed to 'installed', HMRC have determined that these materials do not fall under the definition of energy saving materials and as such are liable to VAT at the standard rate. Given the above, businesses are liable to account for VAT at the standard rate on supplies of these materials from 1st September 2018. If your business supplies damp proofing products and are unsure how this brief impacts you, please call our free VAT helpline for expert advice.
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