Legislative changes to the VAT treatment of energy-saving materials, introduced on 1 October 2019, were reversed in Great Britain with effect from 1 April 2022, according to HMRC's internal manual1. The same changes were reversed in Northern Ireland from 1 May 20231.
The 2019 rules set out the scope of the relief in amended items 1, 2 and 3 of Group 2 of Schedule 7A to the Value Added Tax Act 19941. Item 1 applied the reduced rate to services of installing energy-saving materials in residential accommodation where the materials were not supplied by the installer1. Item 2 applied the reduced rate to installation services including the materials, where the supply was made to a qualifying person and the property was their sole or main residence, where it was made to a relevant housing association, or where the accommodation was used solely for a relevant residential purpose1.
Item 3 applied the reduced rate to installation services including materials where the open market value of the materials did not exceed 60 per cent of the total value of the supply, a condition known as the 60 per cent test1. HMRC states that in practice the test was expected mainly to affect combined installations of solar panels and batteries storing power generated by those panels1. Where the materials exceeded 60 per cent, only the labour element qualified for the reduced rate and the materials were standard rated1.
During the period the rules applied, wind turbines and water turbines did not qualify as energy-saving materials, so their installation did not qualify for the reduced rate1. The manual records that relief for both was reinstated in Great Britain from 1 April 2022 and in Northern Ireland from 1 May 20231.
"these legislative changes which were reversed in GB with effect from 1 April 2022"
The manual describes the 2019 to 2022 position as applying in Great Britain until 31 March 2022 while continuing to apply in Northern Ireland until 30 April 20231. The dates given for Northern Ireland in the same page are not entirely consistent: the text states reversal in NI from 1 May 2023 in one place and relief reinstated in Northern Ireland with effect from 1 May 2023 in another, while the page title refers to the rules continuing to apply in Northern Ireland until 30 April 20231.
Why it matters for households
VAT is charged on the supply and installation of energy-saving materials, so the rate that applies changes the total a household pays for work such as insulation, solar panels and battery storage. Under the 2019 rules, a household buying a combined solar and battery installation could find the materials standard rated and only the labour reduced, because of the 60 per cent test1. Wind and water turbine installations fell outside the reduced rate altogether1. The reversal means the treatment that applied before October 2019 returned in Great Britain from 1 April 2022, and in Northern Ireland from 1 May 20231. For a home weighing up measures that reduce reliance on bought-in energy, the tax treatment of the equipment, not just the installation labour, is part of the cost.
What happens next
The manual gives no further steps beyond the reversal dates. No announcement of any subsequent change to this relief is reported in the page1. Households in Northern Ireland should note the differing dates recorded for that jurisdiction1.