Changes to VAT reduced rate for energy saving materials from 1 October 2019

Thu 13 Jun 2019

Currently, under VATA 1994 Sch7A group 2, the supply of energy saving materials and their installation attract the reduced rate of VAT if the supply is made in residential accommodation.

SI 2019/958 limits the scope of the reduced rate with effect for supplies made on or after 1 October 2019, unless they were both paid for before that date and supplied pursuant to a contract made before that date.

From 1 October 2019 the reduced rate will only apply to energy saving material and their installation, where the supply meets one or more of the following requirements:

1. Supply of services of installing energy-saving material in residential accommodation, where the supplier does not also supply the energy saving material;
2. Supply of services of installing energy-saving materials in residential accommodation where:
   1. the supply is to a person over 60 years old or receiving one or more of a defined range of benefits (VATA 1994 Sch7A group 3 note 6), where the accommodation is the individual’s main residence;
   2. the supply is made to a relevant housing association; or
   3. a supply is for a residential building used for a  relevant residential purpose (see VATA 1994 Sch7A group 1 para 7).
3. Where the supply does not fall within 2 above, the supply of energy saving materials in residential accommodation where the open market value of the materials does not exceed 60% of the cost of the supply to the person to whom it is made.

In addition it will no longer be possible to get the reduced rate of VAT for the supply or installation of wind and water turbines under VATA Sch7A group 2.

Please get in touch with a member of the Mazars indirect tax team to discuss the impact of the above on your business.