An Insulated Roof or Insulation for Roofs? Energy Saving Materials and the VAT Relief
As we experience our latest and highest heatwave here in the UK – the question of energy saving materials of all types and their VAT treatment, is one which also sits high on our client’s VAT checklists. This is particularly true of our social housing providers, who are highly sensitive to a VAT cost, as they are unable to recover the majority of the VAT they incur on the maintenance of their social housing stock. This latest case is, however, one that illustrates that the challenge on VAT treatment is one that could impact on any household who owns a conservatory and is looking to manage their energy costs.
The case related to a company called Conservatory Roofing UK Ltd which had developed a system for roofs which help to insulate them in colder periods and prevent excessive heating in warmer periods. The question – which had been raised at the First Tier Tribunal - was whether this constituted “insulation materials for a roof” which could fall within the, then Reduced, now Zero, VAT rate treatment. This report is from the Upper Tribunal to which the tax payer had been given leave to appeal to allow reconsideration of whether the First Tier Tribunal had reasonably considered all of the tax payers arguments – the decision was that the case should be referred back to the First Tier – so we’ve no definitive ruling on the basis of the liability yet but it does reflect the level of interpretation to be applied when considering the VAT liability of such supplies.
As well as considering the component elements of the supply, the VAT treatment can be influenced by the way in which the service is advertised and also by what a customer believes they are getting; not just what the supplier positions as their offering.
Supplies of energy saving materials are a hot topic at the moment not just because of the amount of spend in this area but because of the way in which the VAT legislation is drafted to deny the apportionment, out of a single, larger contract, of the elements of the works that are seen as the supply and installation of energy saving materials. This explains the commentary in this case as to the predominant nature of the supply influencing the VAT treatment to be applied. Supplying an insulated roof system is not seen in the same way as supplying and installing insulation (energy saving) materials for a roof.
We are working hard with our clients to clarify the VAT treatment that should be attached to the supply and installation of energy saving materials. Therefore, whether you are the housing association, university or other entity planning to commit to such spending projects on residential stock or are the contractor wishing to ensure you price your contracts appropriately, you may wish to have the benefit of a conversation with our expert VAT team. You can get in touch at firstname.lastname@example.org
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