ICAEW.com works better with JavaScript enabled.

TAX NEWS

Spring Statement: VAT rate reduction for the installation of energy saving materials

Article

Published: 23 Mar 2022 Update History

Chancellor Rishi Sunak announced five-year temporary zero rate for installation of energy saving materials in England, Wales and Scotland.

The Spring Statement announced three immediate measures designed to help deal with the rising costs of energy, including a reduction of the VAT rate for the installation of energy saving materials (ESMs). Currently, only some ESMs qualify for the 5% reduced rate.

With effect from 1 April 2022 until 31 March 2027, a temporary zero rate will be introduced to cover the installation of ESMs in Great Britain. This will include wind and water turbines, which were removed from the reduced rate in 2019, following the infraction proceedings brought by the European Commission v United Kingdom (Case C-161/14). The list of qualifying ESMs will also be expanded to include additional technologies.

The complex eligibility conditions such as the social policy conditions and the requirement that over 60% of the total cost of the installation had to relate to the service element when determining the VAT liability of ESM installations will also be permanently removed.

Businesses that provide and install ESMs to customers in England, Wales and Scotland will be eligible for the temporary zero rate.

It is currently envisaged that the 5% reduced rate will be reintroduced with effect from 1 April 2027.

In Northern Ireland, the list of qualifying goods and rate of VAT due on ESM installations will remain unchanged. The Northern Ireland Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide.

Read more:

Spring Statement

On 23 March 2022, the Chancellor delivered his Spring Statement. Read ICAEW's analysis and reaction.

Read ICAEW's analysis and reaction on the 23 March 2022 Spring Statement.
Tax Faculty

This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image
TAXwire

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance
Cover
TAXline

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image
Webinars

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250