We are getting into the Christmas spirit with our own take on the 12 days of Christmas gifting and the tax implications of those special gifts!
Increase your property value and reduce costs with eco-friendly solutions and save VAT!
15 June 2022
Mark Friend
Property Owners, Building & Construction, Reducing Tax
With energy costs going through the roof it could make sense to make small eco-friendly improvements to your property which can reduce running costs and also add value to your property.
In our recent property newsletter (only available to clients of Friend & Grant) we highlighted four ways you can boost your property value and help the environment:
- Upgrade your insulation – particularly solid wall insulation which although costly to upgrade, could boost your property value by 3%.
- Upgrade your boiler – this can provide increased efficiency and longevity and could boost your property value by up to 1.9%.
- Install a charging port for electric cars – this can cost less than £1,000 and could boost your home’s value by 1.5%.
- Get double-glazed windows – could increase your property value by 3%.
In the Spring Statement the Chancellor made some important announcements to incentivise certain businesses and individuals to go more green through the installation of energy savings materials (ESM). Previously under the EU there were restrictions on ESM which meant in most circumstances VAT had to be charged at standard rate.
From 1 April 2022 for a period of five years in Great Britain (the rules remain unchanged for Northern Ireland) these ESM supplies have become zero-rated and restrictions placed on the provisions in 2019 were permanently reversed which means that in the worst case scenario in five years’ time the rate on ESM will be 5%. In the listing above items 1) and 2) are now covered by the reduced rating.
A contractor may now zero-rate the supply and installation in residential property of all the following:
- central heating and hot water system controls;
- draught stripping;
- insulation;
- solar panels;
- wind and water turbines;
- ground source heat pumps;
- air source heat pumps;
- micro combined heat and power units;
- wood-fuelled boilers.
Further information on the application of the zero rate to these supplies from 1 April 2022 to 31 March 2027 can be found at VAT notice 708/6.
A word of warning: the legislation is very detailed and states that the zero-rating applies to all qualifying installations. What constitutes a qualifying installation needs to be reviewed carefully. Firstly the installation must take place in qualifying buildings which are dwellings or are used for a ‘relevant residential purpose’ (care homes, etc). Secondly if the installation is part of a larger contract then again eligibility may be denied. As with anything tax related we always recommend you seek professional advice from your adviser.
If you are a client of Friend & Grant and want to find out more about ESMs then please contact christie@friendandgrant.co.uk.
The content in this blog is correct as at 15 June 2022. See terms and conditions.
