VENSAV3020 - Energy-saving materials: Rules applying to Great Britain with effect from 1 October 2019 until 31 March 2022 and continuing to apply in Northern Ireland.

From 1 October 2019, new legislation came into effect and the scope of the relief is set out in amended items 1, 2 and 3 of Group 2 of Schedule 7A to the VATA 1994. These legislative changes, which continue to apply to Northern Ireland, but which have been reversed in Great Britain with effect from 1 April 2022 are explained below.

Item 1 applies the reduced rate to the supply of services of installing energy-saving materials in “residential accommodation” see VENSAV3100, where the energy-saving materials are not supplied by the person carrying out the installation.

Item 2 applies the reduced rate to the supply of services of installing energy-saving materials in “residential accommodation”, including the energy-saving materials installed, where:

  • the supply is made to a “qualifying person” see VENSAV3110 and the residential accommodation is the qualifying person’s sole or main residence;
  • the supply is made to a “relevant housing association” see VENSAV3120; or
  • the residential accommodation is a building, or part of a building, used solely for a “relevant residential purpose” see VENSAV3130.

Item 3 applies the reduced rate to supplies of services of installing energy-saving materials in residential accommodation, including the energy-saving materials installed, where the “open market value of the supply of the materials” does not exceed 60% of the “cost of the total value of the supply”, see VENSAV3150, of installing the energy-saving materials to the customer. This is known as the 60% test. In practice, it is expected that the 60% test will mainly impact on the combined installations of solar panels and batteries that store power generated by those solar panels.

Where the value of the supply of the energy-saving materials exceeds 60% (i.e. it is 61% or more using normal rounding conventions), then only the labour cost element will qualify for the reduced rate (with the supply of the materials being standard rated).

Wind turbines and water turbines no longer qualify as energy-saving materials and their installation will no longer therefore qualify for the reduced rate. (However, the relief for both was reinstated in Great Britain only with effect from 1 April 2022)

For a summary of these changes please see VENSAV3030.

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