Beat the VAT hike on energy projects

1 March 2016

Older people heating their homes with renewables are hoping to be among those who will continue to benefit in a VAT shake-up for green technologies due later this year.

  • The five per cent rate has been a sweetener which has helped boost the uptake of renewables in recent years. Together with the government’s domestic Renewable Heat Incentive scheme, going green has been made financially appealing and it has helped in the drive towards hitting the UK’s carbon reduction target

Other winners in the restructuring of the VAT rules around sustainable heating are expected to be those claiming certain benefits, explains Michael Wright, of Yorkshire Heat Pumps, a leading renewables installer based near Harrogate.

To qualify, you must be over 60 or getting one or more of the following:

  • Child Tax Credit (but not the family element)
  • Council Tax Benefit
  • Disability Living Allowance
  • Personal Independence Payment
  • a disablement pension
  • Housing Benefit
    Jobseeker’s Allowance (income-based)
  • Income Support
  • War Disablement Pension
  • Working Tax Credit

Energy products that qualify for the reduced rate of 5%:

  • controls for central heating and hot water systems
  • draught insulation, eg around windows and doors
  • insulation on walls, floors, ceilings, lofts, etc
  • solar panels
  • wind turbines
  • water turbines
  • ground-source heat pumps
  • air-source heat pumps
  • micro combined heat and power units
  • wood-fuelled boilers

Michael Wright said:

Sadly, due to a ruling last year from the European Court of Justice, the five per cent special VAT rate which domestic renewables installations have enjoyed up until now is going. However, the over-60s and the more vulnerable in society will hopefully still be able to enjoy the reduction. The change was brought about by the European ruling which demands the UK government step into line VAT-wise with the continent

The change to 20% VAT is expected to come in on August 1 2016 but it’s reported the five per cent rate can still be applied to those who have entered into contracts before the deadline – even if the installation is not complete.

Michael said:

There is a consultation underway and more formal announcements are due in the coming weeks so we cannot be certain of the details and timing, but the likelihood is that some of our ground source and air source heat pump and biomass boiler customers will still be able to claim the lower rate, providing they are over 60 or meet the benefits criteria.

The special rate could also remain in place for buildings “used solely for certain relevant residential purposes or a relevant housing association” although it is currently unclear just what those “relevant residential purposes” might be.

Yorkshire Heat Pumps supplies and installs ground and air source heat pumps and biomass boilers from its Blubberhouses base. It is run by Michael and Kate Wright.

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