Green Building Forum - Zero Rated VAT on Installation of Insulation

Zero Rated VAT on Installation of Insulation

mzthomps — Mon, 01 May 2023 21:45:27 +0100

Hi. I have a 2 bed 1920s mid-terrace which I am upgrading to a high insulation standard. Walls: Cavity is either non-existent or too narrow for cavity fill, so I have taken the inside of external walls back to brick and plastering with diathonite (insulated lime), 100mm of wood fibre and lime finish. Floor: Suspended wooden floor has been fitted with permeable membrane and 140mm sheep wool. Kitchen floor: Have removed the concrete slab, laid a damp proof membrane, 150mm PIR and screed. With the new VAT regs, materials are VATable, but installation should be zero rated. My installer/his accountant is a little reticent to apply to zero rate, probably based on perception or experience that HMRC will challenge it. In my opinion, all the works I have described above should all fall into zero rate as the sole purpose is insulation. Does anyone on here have any experience of the above. Thanks Mark

Zero Rated VAT on Installation of Insulation

tony — Mon, 01 May 2023 21:55:06 +0100

If they charge you VAT when they shouldnâ€™t then yo can reclaim it from HMRC

Zero Rated VAT on Installation of Insulation

WillInAberdeen — Mon, 01 May 2023 23:07:06 +0100

https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086

Installing insulation was reduced rate VAT for many years and is now zero rate, so the accountant should have come across it, if not send them the VAT notice above.

If the installer also supplies the materials, both the materials and labour are zero rated. If you supply the materials then only the labour is zero rated.

A very generous interpretation of the works is allowed, eg including redecorating, plastering etc after installing insulation.

We did this several times, all the installers were familiar with it, or were happy once their accountant had seen the notice. Sometimes the invoices were split, eg loft conversion had one invoice for energy related works (low VAT) and another for everything else (high VAT).

Zero Rated VAT on Installation of Insulation

fostertom — Tue, 02 May 2023 11:17:00 +0100

Yes, I had to fight this battle time after time, with contractors (and their accountants) who resolutely denied this VAT reg despite being shown chapter and verse, especially the ability to split invoices between reduced- and standard-rate work (which, HMRC admitted was ambiguous in the reg, but I had a ref-numbered phone conversation with HMRC which I could quote). And the generosity of interpretation - enabling work could include the whole scaffolding, complete roof re-covering etc, if necessary to the insulation. But never, to this day, new windows!

Zero Rated VAT on Installation of Insulation

djh — Tue, 02 May 2023 12:14:02 +0100

Posted By: tonyIf they charge you VAT when they shouldnâ€™t then yo can reclaim it from HMRC

Are you sure about that?

See https://www.gov.uk/government/publications/revenue-and-customs-brief-4-2022-end-customer-claim-refunds-of-vat-wrongly-charged/revenue-and-customs-brief-4-2022-end-customer-claim-refunds-of-vat-wrongly-charged

Zero Rated VAT on Installation of Insulation

tony — Tue, 02 May 2023 18:12:48 +0100

No so sure now but they may be liable for a fine for wrongly charging it so should give a refund pdq.

Such a shame to have to fight for it

Zero Rated VAT on Installation of Insulation

mzthomps — Fri, 05 May 2023 08:49:25 +0100

Thank you all for your advice. I will let you know how I get on....

Zero Rated VAT on Installation of Insulation

CWatters — Sat, 06 May 2023 14:42:25 +0100

Its common for contractors to be unsure about this sort of thing.

It can sometimes help to issue them with a 'Certificate'. This is just a letter from you to them stating something like..

I certify that the labour and materials used to install Energy Saving Materials (Insulation etc) at my property
..address.. qualifies for zero rate VAT under the guidance provided in 'Energy-saving materials and heating equipment (VAT Notice 708/6)' Paragraphs 2.1, 2.3 and 2.4.

You should include your full name and address and reference any relevant Planning Permission reference number.

Note that if their contract/invoice includes other things such as rewiring that may make the whole thing standard rated. Hopefully you had a separate Electrician do that..

https://www.housing.org.uk/our-work/finance/tax/vat-and-the-installation-of-energy-savings-materials/

Quote: HMRCâ€™s approach to date, in relation to contracts providing for the refurbishment of a property which encompasses both the installation of energy saving materials and other works such as rewiring, new windows, replacement of kitchens and bathrooms etc, is that this constitutes a single supply of refurbishment services subject to VAT at 20% and no relief will be available.

HMRC has stated that zero rating would only be available where there are two contracts with different suppliers, one for the installation of the energy efficient products and the other for the property refurbishments services. From both a commercial and customer care perspective this is not always viable.

Zero Rated VAT on Installation of Insulation

GreenPaddy — Sat, 06 May 2023 19:19:00 +0100

Maybe someone could clarify the HMRC references above?? They seem to refer to residential accommodation, not dwellings.

There's a long list of what is specified by "residential accommodation", and dwellings are not part of that.

A quick-ish search doesn't yoeld anything related to dwellings (excluding new build of course).

Zero Rated VAT on Installation of Insulation

philedge — Sat, 06 May 2023 20:48:56 +0100

If you look in the doc that WiA linked to in post 3, it defines all the property that is covered by "residential accomodation"

Zero Rated VAT on Installation of Insulation

marsaday — Sat, 06 May 2023 22:12:24 +0100

Are you able to claim the vat back on insulation you have installed yourself, with build control over seeing the thermal upgrade as proof ?

Zero Rated VAT on Installation of Insulation

djh — Sat, 06 May 2023 22:27:49 +0100

Posted By: marsadayAre you able to claim the vat back on insulation you have installed yourself, with build control over seeing the thermal upgrade as proof ?

No, see the earlier post by WiA. Unless you're building a new house, of course.

Zero Rated VAT on Installation of Insulation

fostertom — Tue, 09 May 2023 11:07:45 +0100

Posted By: CWattersHMRCâ€™s approach to date, in relation to contracts providing for the refurbishment of a property which encompasses both the installation of energy saving materials and other works such as rewiring, new windows, replacement of kitchens and bathrooms etc, is that this constitutes a single supply of refurbishment services subject to VAT at 20% and no relief will be available.

HMRC has stated that zero rating would only be available where there are two contracts with different suppliers, one for the installation of the energy efficient products and the other for the property refurbishments services

But as I said above:

Posted By: fostertomthe ability to split invoices between reduced- and standard-rate work (which, HMRC admitted was ambiguous in the reg, but I had a ref-numbered phone conversation with HMRC which I could quote)

Zero Rated VAT on Installation of Insulation

CWatters — Fri, 12 May 2023 17:12:01 +0100

Posted By: GreenPaddyMaybe someone could clarify the HMRC references above?? They seem to refer to residential accommodation, not dwellings.

Para 2.23..

https://www.gov.uk/guidance/vat-on-energy-saving-materials-and-heating-equipment-notice-7086#installations-of-energy-saving-materials

2.23 Residential accommodation
The relief for energy-saving materials applies only to installations in residential accommodation. This includes:

* houses, blocks of flats or other dwellings
* armed forces residential accommodation
* childrenâ€™s homes
* homes providing care for the elderly, disabled people, or people who suffer or have suffered from drug or alcohol dependency or mental disorder
* hospices
* institutions that are the sole or main residence of at least 90% of their residents
* monasteries, nunneries and similar religious communities
* residential accommodation for students or pupils
* self-catering holiday accommodation
* caravans used as a place of permanent habitation (such as a park home or static caravans sited on a permanent residential caravan park)
* houseboats that are designed or adapted for permanent habitation and have no means of self-propulsion, or other boats which are used as a personâ€™s sole or main residence, such as canal boats and Dutch barges, on which the boat owner pays Council Tax or domestic rates

The standard rate applies to the installation of energy-saving materials in hospitals, prisons or similar institutions, hotels or inns or similar establishments.

Zero Rated VAT on Installation of Insulation

mzthomps — Mon, 21 Aug 2023 11:52:52 +0100

Update on how I resolved. Spoke to contractor and arranged for split invoicing. So anything relating the installation of insulation ZERO rated. Enhancements (such as chimney breast removal) were STD rated.

Zero Rated VAT on Installation of Insulation

fostertom — Wed, 30 Aug 2023 08:37:09 +0100

Zero Rated VAT on Installation of Insulation

fostertom — Wed, 30 Aug 2023 08:40:16 +0100

Good news. Just to emphasise, this welcome and allowable procedure contradicts what is often said, indeed is implied by HMRC e.g.

Posted By: CWattersHMRC has stated that zero rating would only be available where there are two contracts with different suppliers, one for the installation of the energy efficient products and the other for the property refurbishments services

Zero Rated VAT on Installation of Insulation

Peter_in_Hungary — Wed, 30 Aug 2023 08:56:42 +0100

Posted By: fostertomGood news. Just to emphasise, this welcome and allowable procedure contradicts what is often said, indeed is implied by HMRC e.g.
Posted By: CWattersHMRC has stated that zero rating would only be available where there are two contracts with different suppliers, one for the installation of the energy efficient products and the other for the property refurbishments services

Which implies that you can't get the contractor who is doing the renovation to also do the insulation - which means that doing insulation at the correct time during the renovation could be (will be) fraught.

Zero Rated VAT on Installation of Insulation

fostertom — Wed, 30 Aug 2023 11:27:20 +0100

No Peter, the point is that, as mzthomps says, all can after all in fact be done by one contractor, by just splitting the invoice.

Zero Rated VAT on Installation of Insulation

Peter_in_Hungary — Wed, 30 Aug 2023 13:40:47 +0100

Tom, Hopefully you are correct but the post from HMRC quoted by CW says two contracts with different suppliers. If there was (is) a pedantic type having a bad Monday in HMRC then interpreting the regs strictly could cause problems.

Zero Rated VAT on Installation of Insulation

fostertom — Wed, 30 Aug 2023 15:38:54 +0100

Well, I'm all right Jack, personally, because as I said above

Posted By: fostertomcontractors (and their accountants) who resolutely denied this VAT reg despite being shown chapter and verse, especially the ability to split invoices between reduced- and standard-rate work (which, HMRC admitted was ambiguous in the reg, but I had a ref-numbered phone conversation with HMRC which I could quote). And the generosity of interpretation - enabling work could include the whole scaffolding, complete roof re-covering etc, if necessary to the insulation. But never, to this day, new windows!

So I've at least twice since quoted this numbered phone conversation, to get it reconfirmed by HMRC that we can split the invoice in this way.