If you are planning on or are in the process of having building work done on your home did you know you can potentially avoid paying VAT at 20% on some of the work if it involves ‘energy saving’ for example insulation. Building work associated with ‘energy saving’ is only chargeable at 5% but most building contractors or home owners aren’t aware of this. You do however need to be careful how contracts are structured, and it is better if you can use a separate contract for any energy saving components of the building work.
- controls for central heating and hot water
- draught insulation
- insulation on walls, floors, ceilings and lofts
- solar panels
- air source heat pumps (& ground SHP)
- micro CHP systems
- wood fuelled boilers
In addition if you are over 60 and you meet one qualifying criteria, then you can qualify for reduced VAT on heat appliances, central heating boilers, and renewable energy sources – and potentially their repair and maintenance.
The critical issues to bear in mind are:
- The reduced rate is only applicable if both labour and goods are supplied, so if insulation is supplied without labour the rate is probably 20% (its a little ambiguous)
- The contract can’t part of another home improvement; so for example if you were installing a new kitchen and insulating the walls at the same time – it would be better to have one contract (at 5%) to install the insulation and another for the kitchen at 20%. This useful article provides a good example:
If you are contracted to undertake more than one job at the same premises, the VAT liability will depend upon the individual circumstances. Eg. if you are contracted to build an extension and, as part of the same contract, you are required to fit thermostatic valves to all of the property’s radiators, then this is a single standard rated supply of construction services. However, if you have a contract for an extension build and then, sometime after this work has commenced, the homeowner separately asks you to install thermostatic valves, then the latter is a separate supply and reduced rate.
There are some additional caveats, this article suggests that following changes proposed in 2016 ff you are under 60 and ff the cost of certain materials exceeds the cost of labour, VAT may be payable at 20%, however most commentators believe this proposal has not yet been adopted..
Before you embark on any such work, we do however we suggest you speak to the HMRC on 0300 200 3700 to confirm the work as proposed will attract the lower rate of VAT, record the conversation if you can!