The Value Added Tax (Installation of Energy-Saving Materials) Order 2024 was made on 10th January 2024 by two of the Lords Commissioners of His Majesty's Treasury, Joy Morrissey and Amanda Milling, and comes into force on 1st February 20241. It was laid before the House of Commons on 11th January 20241. The Order amends the Value Added Tax Act 1994 using powers in sections 29A(3), 30(4) and 96(9)1.
The Order widens the temporary zero rate for the installation of energy-saving materials to the same items it adds to the reduced rate group1. The zero rate applies from 1st April 2022 to 31st March 2027 in England and Wales and Scotland, and from 1st May 2023 to 31st March 2027 in Northern Ireland1. The additions are water source heat pumps, certain electrical batteries and certain smart diverters1. The zero rate on these items runs from 1st February 2024 to 31st March 20271.
The Order also extends the reduced rate that applies from 1st April 2027 to installations of energy-saving materials in buildings used solely for a charitable purpose1. It broadens the meaning of "installing energy-saving materials" to include groundworks, or dredging a body of water, needed to install pipework or other equipment for a ground source or water source heat pump1. An electrical storage battery qualifies if it is intended for use solely for storing energy converted from electricity supplied to the home or building in question, or generated by a microgeneration system1. A smart diverter is defined as a device capable of automatically diverting electricity generated by a microgeneration system to one or more appliances, in particular circumstances1.
"Article 3 amends Group 23 in Schedule 8 (zero-rating) to widen the temporary zero-rate for the installation of energy-saving materials to the same items introduced into Group 2 of Schedule 7A by Article 2. This rate will apply from 1st February 2024 to 31st March 2027."
| Item added | Zero rate period | Reduced rate from |
|---|---|---|
| Water source heat pumps | 1st February 2024 to 31st March 2027 | 1st April 2027 |
| Certain electrical storage batteries | 1st February 2024 to 31st March 2027 | 1st April 2027 |
| Certain smart diverters | 1st February 2024 to 31st March 2027 | 1st April 2027 |
The Order states that a building is used "for a relevant charitable purpose" if it is used by a charity otherwise than in the course or furtherance of a business, or as a village hall or similarly in providing social or recreational facilities for a local community1. A Tax Information and Impact Note covering the instrument will be published on the government website, according to the Explanatory Note1.
Why it matters for households
VAT is charged on the supply and installation of energy-saving materials, so the list of qualifying items determines what a householder pays on an installation. Adding water source heat pumps, certain batteries and certain smart diverters to the temporary zero rate means those items fall within the same relief as the materials already listed, for installations from 1st February 2024 until 31st March 2027. The treatment of VAT on home energy installations therefore changes for these items, and the relief has a fixed end date of 31st March 2027 under the temporary zero rate.
For a home, the practical effect is on the cost of adding storage or of diverting surplus generation from a microgeneration system to appliances, where those items meet the definitions in the Order. The battery definition is narrow: it applies only where the battery is intended for use solely for storing energy supplied to the property or generated by a microgeneration system1. The smart diverter definition is likewise specific to devices that automatically divert electricity generated by a microgeneration system1. The Order does not set out rates, prices or eligibility for any grant; it changes the VAT treatment of installation only.
What happens next
The Order comes into force on 1st February 20241. The temporary zero rate on the added items runs to 31st March 2027, after which the reduced rate applies from 1st April 2027, including for buildings used solely for a charitable purpose1. The Tax Information and Impact Note is to be published on the government website; no publication date for it is given in the Order1.
Sources1 cited
- The Value Added Tax (Installation of Energy-Saving Materials) Order 2024, legislation.gov.uk