VENSAV3320 | Energy-saving materials: apportionment of energy-saving materials serving buildings used for both qualifying and non-qualifying purposes

VAT Act 1994, Schedule 7A, Group 2 Item 1 refers to services of installing energy-saving materials ‘in’ residential buildings. This could be taken to imply that energy-saving materials such as wind turbines or ground source heat pumps are never subject to the reduced rate because they are not installed in a building, but in its curtilage. Consequently, HMRC interprets the word ‘in’ in Item 1 to mean ‘serving’ a building.

There may be cases where, say, a wind turbine or a ground source heat pump serves a mixed-use building such as a building consisting of student accommodation and retail units. The law does not allow for any apportionment in such cases meaning that the VAT liability will depend on whether the energy-saving materials primarily serve the qualifying or non-qualifying part of the building (or from 1 February 2024, whether they primarily serve a building intended for use solely for a relevant charitable purpose).