As announced in the Autumn Statement, the definition of “Energy Saving Materials” (ESMs) is being extended to include certain technologies (see below). The installation of ESMs in residential property is currently zero rated.
The relief will also be extended to the installation of ESMs in buildings that are solely used for a relevant charitable purpose. “Relevant charitable purpose” has a specific meaning for VAT purposes so seek advice if you are not sure if your building qualifies.
The relief will also cover certain preparatory groundworks that are needed to instal ground-source and water-source heat pumps.
All the above changes will take effect from 1 February 2024.
Additional technologies eligible for relief from 1 February 2024;
- Electrical batteries that store electricity generated by certain ESMs or taken from the National Grid.
- Water-source heat pumps.
- Diverters that enable excess electricity from certain ESMs to be used within the building in which it is generated rather than being exported to the National Grid.
Notes
The relief only applies to the installation of ESMs. If you buy ESMs without installation you will be charged VAT at the standard rate (currently 20%).
The relief applies only to the specific technologies set out in the VAT Notices, other energy saving products or systems are not eligible for this relief.