VAT on heat pumps to remain at 5%

The government has announced it will keep the reduced rate of 5% VAT on sales of heat pump products. This is excellent news for the heat pump industry.

There had been concerns the rate of VAT applied to heat pump products and energy-saving materials such as solar panels, would rise to 20% following a European Court (EC) ruling that the reduced rate breached EU laws.

The HMRC published a consultation following the EC ruling which planned to increase the VAT rate from 1st August 2016.

There was a large number of organisations, who had relentlessly campaigned against the VAT rise. The Association of Conservation of Energy, the Sustainable Energy Association, the Builders Merchants Federation and many others actively got involved in campaigning against the proposed changes.

Treasury aides have now confirmed that the installation of all energy saving materials will continue to benefit from the current reduced rates of VAT. The European Commission has also said it will bring forward proposals to allow flexibility in the VAT rates applied to different products with in EU countries.

This is important for home owners, installers and manufacturers alike and enables us to make homes warmer, cut bills and save money.
For full details on the VAT reduction on energy products, click here