Energy Saving Materials – Timely Reminder of recent VAT Changes

Many will be familiar with the fact that a reduced rate of 5% VAT applies to the installation of certain energy saving materials in residential accommodation. However, with effect from 1 October 2019, HMRC announced changes that have effectively reduced the overall scope of this reduced rate relief.

Previous legislation permitted the reduced rate to apply to both the qualifying energy saving materials as well as the services provided by the person installing them, with no requirement to identify the split in values between the two.

The amendments which came into effect on 1 October 2019 are as follows:

• The reduced rate no longer applies to the installation of wind and water turbines.
• The reduced rate remains fully available (except on wind and water turbines) for supplies of services of installing qualifying materials in residential accommodation where the “social policy conditions” apply and the supply is made to a ‘qualifying person’ or a relevant housing association or where the residential accommodation is a building used solely for a relevant residential purpose.
• A new threshold has been introduced so that the reduced rate is available (except on wind and water turbines) provided that the value of the qualifying materials does not exceed 60% of the total value of the supply of installing. If the value of the materials exceeds 60%, only the labour cost element will qualify for the reduced rate (with the supply of the materials being standard rated).

For the purposes of this relief, a ‘qualifying person’ is someone aged 60 or over or is in receipt of certain benefits

Just another example of why it’s important to ensure you keep up to speed with the everchanging world of VAT. Centurion VAT are always here when VAT gets complicated and you need some expert support and advice. If this latest change affects your business, please contact a member of the Centurion VAT team at emailus@centurionvat.com to discuss the impact and why not sign up for our VAT Newsbyte’s on our website so as to ensure you can access the latest VAT news.