var _gaq=_gaq||[];_gaq.push(['_setAccount','UA-9920655-1']);_gaq.push(['_trackPageview']);(function(){var ga=document.createElement('script');ga.type='text/javascript';ga.async=!0;ga.src=('https:'==document.location.protocol?'https://ssl':'http://www')+'.google-analytics.com/ga.js';var s=document.getElementsByTagName('script')[0];s.parentNode.insertBefore(ga,s)})()

VAT relief on energy-saving materials extended

Good news for installing new green tech in building projects: the VAT zero rate relief for energy saving materials has been extended for three years. From 1 February 2024 the relief will include water source heat pumps, batteries for storing energy converted from electricity and smart diverters. It also now includes buildings intended for use solely for a relevant charitable purpose.

Extension to Energy Saving Materials (“ESMs”)

The zero-rate VAT relief on installation of ESMs covers the installation of items such as:

  • controls for central heating and hot water systems
  • draught stripping
  • insulation
  • solar panels
  • wind & water turbines
  • ground source heat pumps
  • air source heat pumps
  • micro combined heat and power units
  • wood fuelled boilers

From 1 February 2024, the following are also included:

  • water source heat pumps
  • batteries for storing energy converted from electricity
  • smart diverters

The zero rate will also apply to supplies of groundworks, or dredging a body of water, to install pipework or other equipment needed to operate a ground or water source heat pump.  

Extension to charitable buildings

The relief for ESMs previously applied only to installations in residential accommodation.

From 1 February 2024, the relief includes buildings intended for use solely for a relevant charitable purpose.

A relevant charitable purpose means use by a charity as a ‘village hall’ or similar recreational facilities for a local community, and/or a building used for non-business purposes by a charity. 

Timeframe

This is a temporary extension and is set to expire on March 31, 2027.  At that time installations within the scope of the relief – including those added from February 1 2024, and installations within charitable buildings – will revert to the VAT reduced rate of 5%.  

While the Government has not indicated that it will make the zero-rate relief permanent or extended it beyond March 31, 2027, the position will be kept under review.

How can we help?

We have a dedicated and experienced VAT team with a wealth of experience of advising entities and charitable bodies on how to reduce the cost of VAT.

If you’re with a UK-based charitable body and thinking about installing energy-saving materials, we can help clarify your position and provide advice on how the organisation can reduce, or in some cases eliminate, the cost of VAT., regardless of whether you’re VAT registered.   

If you would like to discuss this relief, or any other VAT queries with us, please contact our VAT team via VAT@ct.me or 0131 558 5800.

Chiene + Tait LLP | Established 1885 - © 2025 | Registered in Scotland No. SO303744