From today, ground source heat pumps will benefit from the government’s zero-rated VAT plan for the co-contracted works needed for their installation.
This means that when homeowners install ground source heat pumps, they will not have to pay VAT on the additional works and services contracted alongside the installation, such as site preparation and excavation.
The supply and installation of ground source heat pumps is already VAT-free under the government’s energy-saving materials and heating equipment notice, which began in April 2022 and will continue to March 2027. The extra VAT relief on co-contracted works is expected to give homeowners another significant reduction in the cost of installing this technology.
In addition, all battery storage installations are VAT zero-rated until March 2027. This applies not just to those that are installed at the same time as solar panels, as was previously the case. This is expected to cut the cost of battery technology for homeowners by 20%.
Bean Beanland, director of growth and external affairs at the Heat Pump Federation, comments: “Homeowners can now invest in ground source heat pumps safe in the knowledge that the zero-rate VAT benefit extends equally to all heat pump technologies. In addition, the clarifications contained in the revised pertinent VAT Notice 708/6 will allow heat pump contractors to apply best practice with respect to lowering system flow temperatures, in the full understanding that emitter upgrades of all types can be included in the concessionary contracts. This package is one more element in the raft of supportive policy initiatives that are required to drive forward the decarbonisation of domestic heat as a very significant contributor to the UK’s Net Zero aspirations.”
The MCS Foundation, which has campaigned for the zero-rating of VAT for battery storage as well as other renewable technologies, says the zero-VAT will support the continued growth of the battery, ground-source heat pump, and renewables sector.
David Cowdrey, director of external affairs at the MCS Foundation, comments: “Battery storage will play a vital role in reducing bills and decarbonising our homes. The zero-rating of VAT which comes into effect today will support more households to install batteries and is a positive step forward.
“In order to ensure continued growth in renewables being installed in UK homes, the Treasury should be planning to extend the zero-rating of VAT until 2030 to really support these new renewable businesses.”
