The government has announced it will reduce the VAT rate on energy saving measures (ESM) and their installation to zero for homeowners. The temporary zero rate will be introduced with effect from 1 April 2022 and last until 31 March 2027.
Announced during the Chancellor’s Spring Statement, the new rate applies to businesses that provide and install energy-saving materials (ESMs) and customers who have the ESMs installed in England and Wales and Scotland. The move is intended to incentivise the take-up of ESMs in line with the government’s net zero objectives.
The new rate will be available for a period of five years and will then revert to the 5% reduced rate of VAT. The list of qualifying energy saving measures include certain controls for central heating and hot water systems, solar panels, heat pumps, biomass boilers, mCHP, and insulation. It also brings wind and water turbines back into scope of the relief.
Commenting on the government’s announcement, Kevin Wellman, CEO of the Chartered Institute of Plumbing & Heating Engineering (CIPHE), says: “The 0% VAT rate will help cut costs and increase demand. However, we must ensure systems are designed and installed correctly to offer the required energy savings. Savvy installers will be signing up to renewable training, such as the CIPHE’s Low Temperature Heating and Hot Water Systems in Dwellings qualification, to ensure they have the knowledge and skill to install such systems.”
BESA’s head of technical, Graeme Fox, adds: “The new incentives will increase demand for competent companies and skilled individuals able to work with these technologies to ensure installations achieve their maximum potential. We must, therefore, work together to develop a national training programme for low carbon heating to ensure we have the skills to deliver solutions on a scale that can both help tackle climate change and give consumers protection from rising bills.”
