5% VAT

 5%VAT

Are you charging your customers too much in VAT? 

Did you know that you may be able to charge only 5% VAT in certain circumstances?

For people working in the construction industry, in residential properties, certain energy saving, heating, security products and mobility aid installations are subject to the reduced VAT rate being 5%.

This includes the cost of the products themselves if you supply and install them. If you only supply the products, then you must charge the standard rate of 20%.

So a plumbing and heating business buying energy saving products and installing these products on a residential property can charge 5% VAT.

The merchant selling the products to a plumbing and heating installation business must charge 20% VAT.

I hope this is clear!

Energy saving, heating, and security

You can charge the reduced rate of VAT on work you do to install qualifying energy-saving products, and certain grant-funded heating and security equipment for people over 60 or on benefits.

Qualifying energy products include: 

• controls for central heating and hot water systems (so Hive, Nest, Worcester Wave, TRVs, Radbot, etc)
• draught insulation, for example around windows and doors
• insulation on walls, floors, ceilings, lofts, etc
• solar panels
• wind turbines
• water turbines
• ground-source heat pumps
• air-source heat pumps
• micro combined heat and power units
• wood-fueled boilers

You can also charge the reduced rate for extra work you need to do as part of the installation. But you must charge the standard rate of 20% on all work if the installation is just part of another, bigger job.

Example 1 You have to cut a new hatch in the ceiling to install loft insulation. Because you needed to do this as part of the insulation, you can charge reduced-rate VAT.

Example 2 You replace a roof with a new insulated one. Because the insulation is just part of a bigger job, you have to charge the standard rate of 20% on the whole job.

Find out more about reduced-rate VAT here for energy-saving products and grant-funded heating and security.

Mobility aids

You can charge the reduced rate of VAT on work you do to install certain mobility aids for people over 60, either in their own private home or in a private home that they share with their friends or relatives.
Qualifying products include:

• grab rails
• ramps
• stair lifts
• bath lifts
• built-in shower seats or showers containing built-in shower seats if you are a plumbing and heating business
• walk-in baths with sealable doors

Could your clients be eligible for a grant to help with the cost of their heating installation?

Central heating systems

The reduced VAT rate of 5% applies to work funded through energy efficiency grants on the:

• installation of heating appliances
• installation, repair and maintenance of central heating systems
• installation, repair and maintenance of renewable source heating systems

The reduced rate is only for the grant-funded part of the work.

To qualify, you must be over 60 or getting one or more of the following:

• Child Tax Credit (but not the family element)
• Council Tax Benefit
• Disability Living Allowance
• Personal Independence Payment
• a disablement pension
• Housing Benefit
• Jobseeker’s Allowance (income-based)
• Income Support
• War Disablement Pension
• Working Tax Credit

Energy products that do not qualify

You pay the standard rate of VAT for:

• heating appliances or systems - unless you get an energy efficiency grant
• energy efficient boilers
• secondary or double glazing
• low emission glass
• energy efficient fridge freezers

This information was correct at time of writing, however we recommend you check the government guidelines prior to implementing any changes to your business as rules can and do change.

If you would like to discuss any of the information in this article, then please do not hesitate to get in touch with us here at Together We Count.

Please use the links to see the full government guidelines.