VAT and the installation of energy savings materials

Social housing providers and housing associations are setting targets to achieve a minimum of EPC band C for their homes by 2030 – in line with fuel poverty legislation for England.

VAT reliefs

Historically the installation of qualifying energy-saving materials in the UK was subject to VAT at 5%, provided certain social condition tests were met. In early 2022, the legislation was amended and provision was made for the social conditions tests to be removed, and for the installation of energy-saving materials in England, Wales and Scotland to be taxed at the zero-rate of VAT during the period 1 April 2022 to 31 March 2027. The rules relating to Northern Ireland were not amended and the installation of qualifying energy-saving materials continued to be taxed at the reduced rate.

Energy saving materials include:

  • Controls for central heating and hot water systems, such as:
    • Manual or electronic timers.
    • Thermostats.
    • Mechanical or electronic valves, including thermostatic radiator valves.
  • Draught stripping.
  • Insulation.
  • Solar panels:
    • Solar collectors such as evacuated tube or flat plate systems, together with associated pipework and equipment, such as circulation systems, pump, storage cylinder, control panel and heat exchanger.
    • Photovoltaic (PV) panels with cabling, control panel and AC/DC inverter.
  • Ground source heat pumps.
  • Air source heat pumps.
  • Micro combined heat and power units.
  • Wood-fuelled boilers.
  • Wind turbines including all equipment essential to the operation of the wind turbine, i.e – mounting poles, electrical cables, battery banks and voltage controllers.
  • Water turbines and all equipment essential to the operation of water turbines, i.e – electrical cables, battery banks and voltage controllers.

Utilisation of VAT reliefs

We are aware that many housing associations are facing issues in utilising the reliefs available, especially where the works are undertaken in conjunction with, or as a part of, a wider property refurbishment programme.

HM Revenue and Customs (HMRC) now accept that zero rating can apply to the installation of the energy efficient product itself, together with all associated works, it has updated it’s guidance accordingly. For example, zero rating will apply to the installation of an air source heat pump, together with new pipes, radiators etc, as well as any associated minor works such as making good damage to walls, plaster, internal décor etc. The Windsor Framework will remove this anomaly.

HMRC’s approach to date, in relation to contracts providing for the refurbishment of a property which encompasses both the installation of energy saving materials and other works such as rewiring, new windows, replacement of kitchens and bathrooms etc, is that this constitutes a single supply of refurbishment services subject to VAT at 20% and no relief will be available.

HMRC has stated that zero rating would only be available where there are two contracts with different suppliers, one for the installation of the energy efficient products and the other for the property refurbishments services. From both a commercial and customer care perspective this is not always viable.

Single versus multiple supply

Over the years, the concept of composite and multiple supplies has developed through evolving case law. A composite single supply is where one component of the supply is the principal component to which all other components are ancillary, integral or incidental. A composite supply can often be identified from the following indicators:

  • A single price.
  • Advertised as a package.
  • Components not being available separately.
  • Provision of all elements/components of the supply taking place at the same time.
  • Customer’s perception of the supply being single.

Whereas, a multiple supply is often identified by the following indicators:

  • Individual pricing and/or invoicing.
  • Items/elements being available individually.
  • Parts of the supply being provided/installed at different times.
  • Elements/components of the supply are not interdependent or connected.
  • The intention of the customer.

Considering government policies in this area, as well as the sectors commitment to achieve a minimum of EPC band C for their homes by 2030, the installation of energy efficient products is an imperative, and the majority of housing associations have developed and have already begun to implement their property decarbonisation strategy. This of itself would appear to indicate that these works are not ancillary to a wider refurbishment strategy.

RSM, representing the NHF, recently raised this issue with HMRC during a Land and Property Advisors Group meeting.  HMRC stated that whether a supply of “refurbishment services” is a single composite supply taxed at the standard rate or a multiple supply, with each element taxed accordingly, will be determined by the exact circumstances of the arrangements. The NHF intends to prepare a discussion document so that this issue can be considered in more detail, and if appropriate, further revisions made to HMRC’s guidance.


Whilst discussions with HMRC are ongoing, we recommend that if they can, housing associations make sure that they have the following in place:

  • Property refurbishment strategy/policy document outlining the organisation’s approach to ensuring that its property portfolio meets the Decent Homes Standard.
  • Decarbonisation strategy document.
  • Procurement process – if possible, rather than tendering a contract on a scheme-by-scheme basis, establish call-off arrangements whereby a range of works can be procured from a number of suppliers. This will help to demonstrate that the organisation's intention was to be able to buy each element separately.
  • Tender/Call Off specifications with separate sections for decarbonisation works and refurbishment works, and for each to be priced accordingly.
  • Documentation to demonstrate the rational for delivering the works as one project, for example – to minimise the impact on tenants etc.

This approach to procurement will help to demonstrate that what is being purchased is a mixed supply, and in turn each element should be taxed accordingly.


RSM is a leading provider of audit, tax and consulting services, with around 3,800 partners and staff in the UK. We're working with our tax advisors RSM to help shape government policy on taxation as it affects the sector and to keep housing associations informed of key issues.

Find out more

Who to speak to

Adam Gravely, Finance Policy Officer