HMRC Taxes

5% VAT scrapped on Energy Saving Materials

by Berthold Bauer on March 23, 2022

The Chancellor today [23 March 2022] announced extending the Zero Rate of VAT to Energy Saving Materials, clearly in response to the soaring price of fuel and energy but to a degree permitted by the departure of the United Kingdom from the EU (European laws restricted where, and to what, Member States could apply lower rates). 

This has also allowed him to reverse the EU decision to prohibit the lower rate being applied to wind and water turbines, reverse the EU restriction on ‘end-users’, but does not seek to apply a wider application to energy saving materials in general (for example triple glazing or condensing boilers).

Key points are

  • The zero rate will only be for five years [until March 2027 whereupon the rate will revert to 5%]
  • Eligible items extended: Wind & Water turbines added back into the Eligible list
  • Cost restrictions removed: no longer restricted to the ‘labour only’ element where the items themselves exceed 60% of the total cost
  • Social policy test removed: a further reversal of the EU restriction that prevented Charities benefiting from the Relief. Now allowed.

Whilst the end-user tests seem to have been relaxed, there is no indication that the zero rate will apply to commercial premises or Businesses

[Note: due to Brexit complications the rate change will not apply to Northern Ireland]

There is a further promise to reduce red-tape, but as yet no details on Evidence and Eligibility have been published by HMRC

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Berthold Bauer5% VAT scrapped on Energy Saving Materials

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