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VAT relief on energy saving materials

The University of Bath can claim zero-rated VAT on energy-saving materials for student accommodation and qualifying research buildings.

Zero rated VAT on energy saving materials

The University of Bath (University) can claim VAT zero rate when purchasing energy savings materials (ESM) for its student accommodation and relevant charitable purpose buildings (University research buildings).

See online HMRC VAT notice 708/6 – Energy saving materials & heating equipment.

The VAT Zero rate VAT is due to go back to 5% VAT on 1 April 2027.

There are a wide range of energy saving materials where the VAT zero rate applies, for example:

  • controls for central heating and hot water systems
  • draught stripping
  • insulation
  • solar panels
  • wind turbines
  • water turbines
  • ground source heat pumps
  • air source heat pumps
  • micro combined heat and power units
  • wood-fuelled boilers
  • water source heat pumps
  • batteries for storing energy converted from electricity
  • smart diverters

To get the maximum VAT relief the University should pay a business to supply and install the ESM. The VAT zero rate is on the supply and installation when provided together by one supplier.

If the University buys the ESM from one supplier and pays another to install the ESM, the purchase of the ESM would be subject to VAT at 20% and the installation charge would be VAT zero rated.

The VAT zero rate does not usually include repairs and maintenance to the installed ESM.

It requires forward planning to obtain the zero rate VAT, and discussion with contractor to ensure they are prepared to raise their invoice VAT zero rated. A certificate claiming the VAT zero rate is not mandatory but will be included in purchase orders for ESM in the CLEAR project.

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