Chancellor Rishi Sunak concentrated his VAT shake-up by focusing on energy-saving building materials in his Spring Statement on 23 March 2022.

VAT: Installation of Energy-Saving Materials

From1 April 2022:

  • There will be a widening of the relief available for the domestic installation of qualifying Energy-Saving Materials (ESMs).
  • Qualifying ESMs include thermal insulation and solar panels.
  • The list of qualifying ESMs will be expanded to include additional technologies.
  • The expanded list of qualifying ESMs will once again include wind and water turbines, which had previously been made outside of the scope of reduced rating.
  • Qualifying installations will be zero-rated instead of the current reduced rate of 5%. This will be time-limited from 1 April 2022 until 31 March 2027, when the 5% rate will be reintroduced.
  • Currently, where the ESMs are supplied by the person installing them, there are eligibility criteria that must be met in order to qualify for the 5% rate as per Group 2 of Schedule 7A VATA 94. These are:
    • Where social policy conditions are met (for example, the individual receiving the installation is over 60 years old or receiving certain benefits).
    • Where the cost of the ESM does not exceed 60% of the total value of the supply.
  • The removal of turbines from the list and the eligibility conditions were imposed following EU infraction proceedings in 2019. These restrictions can be reversed now that Great Britain is outside of the EU.
  • These changes cannot be applied in Northern Ireland as it is still bound by EU rulings. The Northern Ireland Executive will receive a Barnett share of the value of the relief instead.

Useful guides on this topic

Spring Statement 2022: Tax Summary
At a glance guide to new measures announced during the Spring Statement

Energy-Saving Materials
The supply and fitting of energy savings materials in residential accommodation attracts a reduced rate of VAT. What does it apply to? What are the qualifying conditions? What case law is there on this topic?

External links

Spring Statement 2022

Policy Paper: The Value Added Tax (installation of Energy-Saving Materials) Order 2022

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