Responding to HMRC’s consultation on VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions, the CIOT suggests that reform of the VAT rules could incentivise the installation of energy-saving materials (ESMs). The CIOT believes that in principle VAT relief on battery storage could meet the government’s three key objectives (improving energy efficiency and reducing carbon emissions, cost effectiveness, and alignment with broader VAT principles).
Feedback received by the CIOT suggests that installation of ESMs as part of a wider contract of building works creates complexity for suppliers and customers, particularly where there are questions around whether the works constitute a single or multiple supply. Installations of ESMs which are part of a wider contract of works by a main contractor will follow the VAT liability of the main works, so may not benefit from zero-rating. The CIOT notes the importance of making the VAT position clear in HMRC’s guidance, particularly if relief for installation of ESMs in buildings intended for use solely for a relevant charitable purpose is to be reinstated. The CIOT thinks that there would be merit in considering a specific carve-out for ESMs, where normal single vs multiple supply considerations are suspended in order to deliver the government’s ambition to increase energy efficiency and bring down bills for households.
The VAT rules for installations of ESMs which are part of a wider single supply of refurbishment works for housing associations and charities should also be reviewed according to the CIOT, to consider whether the Card Protection Plan principles (which determine whether a transaction with several elements constitutes a single supply or separate supplies) should be set aside. Housing associations hold a significant amount of the UK’s rented domestic housing stock and will play a part in increasing the number of homes that are fuelled by ESMs rather than fossil fuels. As the CIOT notes, HMRC now has the opportunity to consider how the VAT position for this sector could facilitate more rapid uptake of ESMs.
Responding to HMRC’s consultation on VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions, the CIOT suggests that reform of the VAT rules could incentivise the installation of energy-saving materials (ESMs). The CIOT believes that in principle VAT relief on battery storage could meet the government’s three key objectives (improving energy efficiency and reducing carbon emissions, cost effectiveness, and alignment with broader VAT principles).
Feedback received by the CIOT suggests that installation of ESMs as part of a wider contract of building works creates complexity for suppliers and customers, particularly where there are questions around whether the works constitute a single or multiple supply. Installations of ESMs which are part of a wider contract of works by a main contractor will follow the VAT liability of the main works, so may not benefit from zero-rating. The CIOT notes the importance of making the VAT position clear in HMRC’s guidance, particularly if relief for installation of ESMs in buildings intended for use solely for a relevant charitable purpose is to be reinstated. The CIOT thinks that there would be merit in considering a specific carve-out for ESMs, where normal single vs multiple supply considerations are suspended in order to deliver the government’s ambition to increase energy efficiency and bring down bills for households.
The VAT rules for installations of ESMs which are part of a wider single supply of refurbishment works for housing associations and charities should also be reviewed according to the CIOT, to consider whether the Card Protection Plan principles (which determine whether a transaction with several elements constitutes a single supply or separate supplies) should be set aside. Housing associations hold a significant amount of the UK’s rented domestic housing stock and will play a part in increasing the number of homes that are fuelled by ESMs rather than fossil fuels. As the CIOT notes, HMRC now has the opportunity to consider how the VAT position for this sector could facilitate more rapid uptake of ESMs.
