What changes have been proposed?
VAT currently apply to the installation of the following measures in residential accommodation (including dwellings and buildings used solely for a relevant residential purpose – such as care homes, children’s homes, etc.):
The main change heat pump installers need to be aware of is that in most cases the reduced rate will only remain available in residential accommodation provided that the open market value of the supply of the ESMs does not exceed 60% of the cost (excluding VAT) of the total value of the supply of installing the energy saving materials to the customer. If the value of the energy saving materials exceeds 60%, then only the labour cost element will qualify for the reduced rate (with the supply of the materials standard rated).
The reduced rate will also remain fully available on supplies of services of installing ESMs in residential accommodation that meet the “social policy test”:
The reduced rate of 5% will no longer be available for the installation of wind or water turbines.
For those installations that do not pass the social policy tests, this policy change could make a material difference to the final price paid by the consumer.
When will the change come into effect?
The changes will affect supplies made on or after 1 October 2019 except for supplies paid for before that date or made pursuant to a contract entered into before that date.
Want more information about this?
Read the government’s information page here
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