HM Revenue and Customs published the outcome of its consultation on VAT energy saving materials relief on 11 December 2023, confirming changes announced at Autumn Statement 2023. The relief, which applies to the installation of energy-saving materials, will be expanded by updating the list of materials that qualify, extending it to installations in buildings used solely for relevant charitable purposes, and including certain groundworks necessary for ground and water source heat pumps1.
The call for evidence ran from 10:30am on 15 March 2023 to 11:45pm on 31 May 2023, and sought views on two further potential areas of reform: the inclusion of additional technologies, and extending the relief to buildings intended solely for a relevant charitable purpose1. It built on changes announced at Spring Statement 2022, which the government said provided tax incentives worth approximately £280 million to improve the energy efficiency of homes over a five-year period to 31 March 20271.
HMRC's internal manual sets out what the expansion covers and when it took effect. With effect from 1 February 2024, the relief was expanded to include the installation of qualifying energy-saving materials in buildings used solely for a relevant charitable purpose, such as village halls or similar recreational facilities for a local community; three further materials; and supplies of groundworks, or dredging a body of water, to install pipework and other equipment necessary for a ground or water source heat pump2.
| Added from 1 February 2024 | Detail |
|---|---|
| Charitable purpose buildings | Installation of qualifying energy-saving materials in buildings used solely for a relevant charitable purpose, such as village halls2 |
| Additional materials | Water source heat pumps; electrical battery storage; smart diverters2 |
| Groundworks | Supplies of groundworks, or dredging a body of water, for pipework and equipment necessary for a ground or water source heat pump, in or in the curtilage of residential accommodation or relevant charitable purpose buildings2 |
The changes were implemented by amendment to Group 23 of Schedule 8 and Group 2 of Schedule 7A to the Value Added Tax Act 19942. The government's own summary of the outcome states:
"The government has announced at Autumn Statement 2023 that it will expand the VAT zero rate available on the installation of energy-saving materials by updating the list of materials that qualify for relief, and extending the relief to installations in buildings used solely for relevant charitable purposes."
Why it matters for households
The zero rate reduces the VAT charged on installing qualifying energy-saving materials, so the expansion widens the range of work that can be bought at the zero rate rather than the reduced rate. For a household, that changes the tax element of the price quoted for eligible installations, including heat pump groundworks and, for the first time, electrical battery storage and smart diverters2. Battery storage matters to energy independence because it allows electricity generated at home to be kept and used later rather than exported immediately, though the sources do not quantify any saving.
The extension to buildings used solely for relevant charitable purposes, such as village halls, means community buildings can also have qualifying measures installed at the zero rate2. The relief does not cover every measure or every building; eligibility depends on the material and the property, and the sources do not list every qualifying item here.
What happens next
The expansion took effect on 1 February 20242. The temporary zero rate applies until 31 March 2027, after which the affected supplies revert to the reduced rate2. The consultation outcome page also links to a summary of responses1.