Chartered Accountants and Professional Business Advisers

The greenish tax!

VAT isn't known for having particularly green credentials but it does have a bit of a social conscience.

This is most visible when looking at sectors such as food, children’s clothing, education, welfare and health where there are very specific reliefs.

What is less well known is that there are some reliefs aimed at encouraging use of ‘energy saving materials’ where the rate of 5% rate can be applied rather than the full 20%. Of course, as this is VAT law, the relief is restricted and only apply to the following:

  • 'Supply and install' which means you won’t get the relief if you buy the goods from one company and then install them yourself or arrange for a different company to perform installation.
  • A very specific list published by HMRC which covers the main items you would expect to see such as solar panels, wind turbines and water turbines.  VAT Notice 708/6 on the HMRC website provides the full list.
  • Installations in dwellings and other buildings that provide places for people to live such as care homes.

The items on the list are strictly interpreted .  For example, relief applies to the supply and installation of loft insulation but not to installation of a thermally-efficient replacement roof as decided in a recent VAT Tribunal Case, HMRC v Wetheralds Construction.

There's also a relief for the grant-funded installation of heating equipment. But this is not confined to energy-saving heating systems so isn't really a ‘green’ relief.

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