HMRC confirm draft VAT on ESM regulations remain unchanged

Released 10 July 2019

HMRC’s consultation on the draft VAT (Reduced Rate) (Energy-Saving Materials) Order 2019 has concluded and no changes have been made to the legislation as a result of the consultation.

The legislation was approved by Parliament on 26 June and will take effect from 1 October 2019.

A reduced rate of 5% VAT applies to the installation of certain energy-saving materials (ESMs) in residential accommodation. The regulations amend the scope of the reduced rate as follows:

the reduced rate for the installation of wind turbines and water turbines is being withdrawn; and

the reduced rate will be limited to the labour cost element of a supply of installation where the value of the materials exceeds 60% of the total cost charged to the customer. However, this restriction will not apply where the customer satisfies certain conditions (is aged 60 or over or is in receipt of certain benefits), the supply is to a relevant housing association or the building in which the ESMs are installed is used solely for a relevant residential purpose.

In all other respects, the relief is retained in full.

View VAT: changes to the reduced rate for energy-saving materials (2019).

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