VAT ESM relief extended to Northern Ireland on 1 May 2023

The temporary VAT zero rate for the installation of energy-saving materials (ESMs) was extended to Northern Ireland on 1 May 2023, HM Revenue & Customs confirmed¹. The measure, made by the Value Added Tax (Installation of Energy-Saving Materials) Order 2023, aligns the VAT treatment of ESM installations in Northern Ireland with Great Britain and is allowed under the Windsor Framework¹.

The zero rate had applied in Great Britain since 1 April 2022 and runs until 31 March 2027, after which installations revert to the reduced rate of VAT at 5%¹. The instrument also extended to Northern Ireland the reversal of 2019 legislation that had narrowed the scope of the previous relief¹. HMRC's internal manual states that the government extended the earlier changes to Northern Ireland with effect from 1 May 2023, "thereby ensuring consistency across the whole of the United Kingdom"³.

"Following the ratification of the Windsor Framework, this VAT relief was extended to Northern Ireland on 1 May 2023."

The relief covers the services of installing qualifying materials in residential accommodation, and the supply of those materials by the person who installs them; materials bought from a retailer without installation remain standard-rated⁵. Qualifying materials include insulation, draught stripping, central heating and hot water controls, solar panels, wind and water turbines, air, ground and water source heat pumps, micro combined heat and power units and wood-fuelled boilers⁵. From 1 February 2024 the scope was widened further, to electrical storage batteries, water source heat pumps, smart diverters and certain preparatory groundworks, and to buildings used solely for a relevant charitable purpose². Those later changes also apply across the whole of the United Kingdom as a result of the Windsor Framework⁴.

The Northern Ireland Sustainable Energy Programme, funded through a levy on electricity customers, reported that the introduction of 0% VAT on energy efficiency measures in Northern Ireland from May 2023 meant installation costs were lower, enabling its funds to go further in 2023/24⁷. NISEP spent £7,475,977 on schemes that year and installed 14,445 measures, a decrease of 4,610 on the previous year⁷.

Why it matters for households

For a household in Northern Ireland, the change meant the VAT charged on the installation of qualifying energy-saving materials fell from the reduced rate of 5% to zero, matching the position that had applied in Great Britain since April 2022. The saving applies to the installed cost, so it depends on the installer passing it on; HMRC states that individuals benefit from lower prices charged by ESM installers, subject to the degree to which businesses pass the savings on². The relief is time-limited, and the zero rate is due to expire on 31 March 2027, at which point installations revert to 5%⁴. It applies to the installation service and to materials supplied by the installer, not to materials bought separately⁵. The separate Northern Ireland rules sit alongside grant schemes such as the Affordable Warmth Scheme and NISEP, which are funded separately⁷.

What happens next

The zero rate runs to 31 March 2027, after which supplies revert to the reduced rate of 5%². HMRC states the measure will be kept under review through communication with affected taxpayer groups². No further extension of the relief to Northern Ireland beyond these dates has been reported.

Sources7 cited

1. VAT: relief for energy-saving materials to Northern Ireland - GOV.UK, gov.uk
2. Extension of VAT energy-saving materials relief - GOV.UK, gov.uk
3. VENSAV3036 - Energy-saving materials: rules applying to Northern Ireland from 1 May 2023 - HMRC internal manual - GOV.UK, gov.uk
4. Summary of responses - GOV.UK, gov.uk
5. Energy-saving materials and heating equipment (VAT Notice 708/6) - GOV.UK, gov.uk
6. [](https://www.legislation.gov.uk/ukpga/1994/23/schedule/7A/part/2/chapter/2/2024-04-06/data.xht), legislation.gov.uk
7. 2023-24 NISEP Annual Report.pdf, uregni.gov.uk