Changes to the VAT rate for Domestic Heat Pump Installations

HM Revenue and Customs have withdrawn their reduced VAT rate for domestic heat pump installations. The 5% rate that was previously applicable for Energy-Saving Materials has now been increased to the standard VAT rate of 20%. However, labour costs are still at the reduced rate of 5%.

The reduced rate will no longer apply for domestic heat pump projects unless:

If all the materials for the project cost less than 60% of the entire project cost this will still be at a 5% reduced rate with the remaining 40% or more being a labour cost.
If the client is claiming council tax, housing benefits, income support, disablement pension, or aged over 60 this will also be applicable for the 5% reduced rate.
New builds are currently zero-rated which also means these will not be affected by the change.

The above came into effect on the 1st October 2019.

If you have any questions please do not hesitate to contact us.

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