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HMRC internal manual

VAT Energy-Saving Materials and Grant-Funded Heating Supplies

HM Revenue & Customs
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Grant-funded installations: how the Warm Front and similar schemes operate

Generally, these government schemes operate through scheme managers and contractors.

For example:

Contractor A installs the grant-funded energy-saving materials in the home of Mr X (the qualifying person), and issues the invoice to Y (either to companies who are Warm Front Managers, or to a local authority) and charges the reduced rate of VAT.

In this scenario, the application of reduced rate is appropriate, if all the following conditions are met:

  • installed items are in line with what is allowed under the VAT Act 1994, Schedule 7A Group 3, Legal Note 4 to 5;
  • Mr ‘X’ is a qualifying person under the VAT Act 1994, Schedule 7A, Group 3, Legal Note 6(1) to 6(2); and
  • payment is made from the grant-funding available under the relevant scheme in line with the VAT Act 1994, Schedule 7A, Group 3, Legal Note 2(1) to 2(4).

The first bullet point may be easy to establish during the assurance visit, but for the last two bullet points, you will need to look at the paper work supplied to the contractor at the time of ordering the work by the Warm Front Managers or local authority. They are expected to provide contractors with full information before asking the supply to be charged at the reduced rate.