Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

VAT on heating systems

Dear Sir,

I refer to a news item on page 4 of the April 20th issue under the headline “Trade bodies issue warning to industry over VAT rate”.

I would contend that the information in this item could be mis-leading particularly in relation to the supply and installation of heat pump or wood fuelled boilers.

The item implies that confusion has arisen over certain ESM energy saving materials that can be charged at a lower rate of VAT.

It was indicated the HMRC stated that ESM reduced rate VAT is only applicable when the qualifying items are supplied and installed in isolation and cited as an example a central heating ‘system comprising boiler, radiators, copper pipe, radiator valves and controls’.

In this example it is the case that all but the boiler would indeed qualify for reduced rate VAT if supplied and installed in isolation - but as the boiler (if conventional gas/oil or direct electric fossil fuel type) does not qualify for ESM the reduced rate could not be applied.

However, your readers need to be aware if the boiler in the example is replaced by a ground or air source heat pump - or wood-fuelled boiler then this and the other elements of the installation would indeed all qualify for the reduced rate of VAT (5%) and this would include minor building works as part of making good.

It is true that the guidelines for ESM and reduced rate VAT can be fairly complex and only applicable in homes and certain residential and charity buildings. It is advisable to carefully read the HM Notice 708/6 (August 2006).

I hope this is of assistance.

Mike Nankivell
Space Airconditioning plc