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The extension of relief for energy-saving materials now continues beyond February 2024

energy-saving materials

The VAT zero rate is set to expand, encompassing a broader range of energy-saving materials, with the added provision of relief for installations within specific charity buildings. In the aftermath of the Spring Budget 2023, HMRC initiated a call for evidence, seeking opinions on the potential extension of the VAT zero rate concerning the installation of energy-saving materials (ESMs). This inquiry specifically examined the possibility of extending the relief to cover additional technologies and the installation of ESMs in charitable premises.

Following a comprehensive review of the responses received, which included input from ICAEW, HMRC has officially declared an enlargement of the VAT zero rate’s scope. The detailed expansion, outlined below, will come into effect starting February 1, 2024.

Electrical battery storage

Electric battery storage currently meets the criteria for the VAT zero rate when installed alongside a qualifying Energy Saving Material (ESM).

Starting from February 1, 2024, the zero rate will be expanded to include electric battery storage that is retrofitted to a qualifying ESM. Additionally, the installation of electric battery storage as an independent technology connected to the grid will also qualify for the VAT zero rate.

Other technologies

Respondents to the call for evidence proposed a diverse array of technologies for potential inclusion in the VAT zero rate.

As of February 1, 2024, the government has affirmed that the following technologies will be incorporated into the zero rate:

  • Water-source heat pumps; and
  • Diverters retrofitted to Energy Saving Materials (ESMs) like solar panels and wind turbines.

Groundworks for heat pumps

The aim of this VAT relief is to exempt the entire installation process from VAT. The government acknowledges the integral role of groundworks in installing ground-source and water-source heat pumps. Consequently, the relief will encompass specific groundworks, with a precise list of qualifying groundworks to be outlined in VAT legislation.

You Must Read: Government increases heat pump grant to £7,500 to cut pollution and lower utility bills


Until August 2013, UK legislation granted VAT relief for the installation of Energy Saving Materials (ESMs) in a building designated solely for a pertinent charitable purpose. This VAT relief will be reinstated as of February 1, 2024. Eligible charities will have the privilege of installing all ESMs covered by this relief without incurring VAT until March 31, 2027.

A pertinent charitable purpose is defined as the utilization of a building by a charity “otherwise than in the course or furtherance of business.” This encompasses applications such as usage as a village hall or a similar structure (refer to section 14.7.1 of VAT Notice 708).

Sunset Clause

The current VAT zero rate for Energy Saving Materials (ESMs) is temporary, set to conclude on March 31, 2027. Following this expiration, the installation of technologies covered by the relief will transition to the VAT reduced rate of 5%. This includes ESMs added from February 1, 2024, and installations within charitable buildings.

As of now, the government has opted against making the zero rate for ESMs permanent or extending it beyond March 31, 2027. However, there remains a possibility that the zero rate may be extended before its scheduled expiration.


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