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Money & Rights

Beat the VAT Hike

With the budget being announced this week, Michael Wright looks at one of the ways it could affect you.

Older people heating their homes with renewables are hoping to be among those who will continue to benefit in a VAT shake-up for green technologies due later this year.

Other winners in the restructuring of the VAT rules around sustainable heating are expected to be those claiming certain benefits, explains Michael Wright, of Yorkshire Heat Pumps, a leading renewables installer based near Harrogate.

Said Michael: "Sadly, due to a ruling last year from the European Court of Justice, the five per cent special VAT rate which domestic renewables installations have enjoyed up until now is going. However, the over-60s and the more vulnerable in society will hopefully still be able to enjoy the reduction. The change was brought about by the European ruling which demands the UK government step into line VAT-wise with the continent."

The five per cent rate has been a sweetener which has helped boost the uptake of renewables in recent years. Together with the government's domestic Renewable Heat Incentive scheme, going green has been made financially appealing and it has helped in the drive towards hitting the UK's carbon reduction target.

The change to 20% VAT is expected to come in on August 1 2016 but it's reported the five per cent rate can still be applied to those who have entered into contracts before the deadline - even if the installation is not complete.

Said Michael: "There is a consultation underway and more formal announcements are due in the coming weeks so we cannot be certain of the details and timing, but the likelihood is that some of our ground source and air source heat pump and biomass boiler customers will still be able to claim the lower rate, providing they are over 60 or meet the benefits criteria."

The special rate could also remain in place for buildings "used solely for certain relevant residential purposes or a relevant housing association" although it is currently unclear just what those "relevant residential purposes" might be.

Michael said: "We are happy to advise any prospective customers considering a switch to a renewable energy heating system on the cost implications of this impending change.

"The move could result in additional costs running into thousands of pounds so we would urge anyone considering going green to act sooner rather than later to avoid the VAT price hike."

Yorkshire Heat Pumps supplies and installs ground and air source heat pumps and biomass boilers from its Blubberhouses base. Run by Michael and Kate Wright, the company prides itself on the quality of its installations and unparalleled customer service and care.

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