REDUCED VAT FOR CONTROLS INSTALLATIONS

VAT can be difficult to understand at the best of times, but it is really important that you are up to speed with the rate changes for heating controls and the implications for your business.

Her Majesty’s Revenue and Customs (HMRC) has reduced the rate of VAT payable on some energy saving installations, including heating controls. Now, consumers pay just 5% for their heating controls and the work associated with installing them.

Passing this reduced rate on to the householder is required by HRMC and presents a unique opportunity to installers, giving potential customers an added incentive to upgrade their controls.

But how does it all work?

First of all, it is important to note that the 5% VAT is only applicable on domestic projects and buildings that are used ‘solely for a charitable purpose’ like village halls.

The reduced rate covers not only the controls but also the cost of any work that is necessary to complete the installation. However, this only applies when heating controls are installed on their own and not as part of a new central heating system. A new central heating system counts as one installation, and because all of the components of a new system are not on the ‘energy saving products’ list, it does not qualify for the reduced rate.

The 5% VAT only comes into force when the controls have been installed and should be included on the final customer invoice. You are then able to claim back your VAT directly from HRMC, but will need to able to prove that the heating controls were installed into a qualifying domestic or charitable project.

Not only will these savings make the installation a more attractive proposition for the customer, but it will potentially help you with cash-flow by being able to pay less for certain products.

As with all things tax related, if you are unsure about the 5% VAT then you should consult your tax advisor or accountant, or contact the HMRC for further details. The reduced rate effectively means a saving of 15% for householders, without you being hit in the pocket. Sounds good doesn’t it.