Seize the VAT

Seize the VAT

Amid all the despair, there is an upside to this month’s rise in the standard rate of VAT. 
The Treasury has confirmed that energy saving products and services will continue to attract a reduced rate of 5 per cent – an even more significant differential now the standard rate has hit 20 per cent. As a result, consumers could reclaim hundreds of pounds on the purchase and installation of systems like solar panels, heat pumps, combined heat and power and central heating controls.

The reduced rate applies to the supply of “services of installing energy saving materials” in residential properties and buildings intended for use by charities so the whole process carried out by contractors is covered – not just the cost of the product. Installations in new buildings are zero rated.

HVCA president Martin Burton is in print this month urging contractors to be alert to this kind of potential bright spot. He reminds us that it is an important part of our role to keep clients informed.

“Everyone is approaching 2011 with grim determination knowing that belts are being tightened everywhere,” he says. “The general rise in VAT is likely to have a negative impact in a number of areas, but if it, conversely, makes energy saving technologies more financially attractive then it is important that we inform our clients.”

This year is going to be very tough and raising VAT will make consumers even less enthusiastic about spending money on products and services. However, there is a huge potential refurbishment market out there and the Government is determined that we start tackling the energy performance of existing buildings in a meaningful way.

By making energy saving systems effectively 15 per cent cheaper than less sustainable alternatives through the VAT system, the Treasury is presenting us with another powerful argument to make to our clients.