Reduced VAT rate of 5% on Heat Pumps

Quick, take advantage of the reduced VAT rate of 5% on energy saving materials, which includes Air Source Heat Pumps, as this may all change this year!

How the reduced VAT rate works

The reduced rate mainly applies to residential properties.

Equipment and installation costs for a qualifying project must be on the same invoice to benefit from the reduced rate of VAT. Therefore, the contractor will purchase an Air Source Heat Pump at the standard rate VAT (20%), but will sell to the qualifying final customer at the reduced rate VAT (5%).

The ‘input tax’ (VAT paid by the supplier when he made the purchase) will be more than the ‘output tax’ (VAT he charges) and the difference between the two can be reclaimed from Customs and Excise via the normal quarterly VAT return.

Charities providing certain social, recreational or residential facilities may quality until April 2013.

If you would like further information please visit the HMRC website.

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