The Chancellor's Spring Statement speech – was given on Wednesday 22 March 2022
VAT on installation of energy-saving materials
Free of the shackles of the EU, the UK government is flexing its newfound legislative powers by introducing a new zero-rate category for the installation of energy-saving materials and casting off those pesky social policy requirements forced on us in late 2019.
The zero-rate will start on 1 April 2022 and last for five years to 31 March 2027, at which point expenditure on such installations will revert to the more standard 5% reduced rate, by default – unless the government decides otherwise in the interim.
While the social policy constraints imposed by the European Courts clearly rankled at HM Treasury, the introduction of a new zero rate category is, I think, the more meaningful development: that is a reversal in the fortunes of a long-endangered species that I could really get behind.
Just as a reminder, energy-saving materials, and their installation include:
- Solar panels – thermal and photovoltaic
- Heat pumps – ground- or air-source
- Turbines – wind or water, are back in the game
- Draught stripping and insulation
- Controls for central heating and hot water systems, including thermostats, thermostatic radiator valves and timers
- Micro combined heat and power
- Wood-fuelled boilers
This is clearly a “green” policy and should significantly cut the cost of installing energy-efficient measures for some housing stock. But it will continue to apply only to the overall (supply-and-fit) cost of installing such items, while their ‘standalone’ purchase – for instance, directly by homeowners – will still be standard-rated. Perhaps this is the reason why HMRC’s corresponding Tax Information and Impact Note forecasts savings of only £50million - £60million annually when the true cost of “greening” UK housing stock seems likely to run to tens of £billions.