VENSAV2070 - History of the reduced rate: scope of the relief restricted in 2019 (overview)

These further discussions with the European Commission resulted in positive developments.  Under the revised proposals, while the installation of wind and water turbines became standard rated, the installation of solar panels (along with all the remaining energy-saving materials) in residential accommodation fully qualified for the relief in certain circumstances. These included installations for the over-60s, for relevant housing associations, in relevant residential accommodation, and where the cost of the energy-saving materials did not exceed 60% of the total charge to the customer – a substantial increase from the 50% originally consulted on in 2015-16. This revised legislation was consulted on in 2019 and subsequently approved by Parliament on 25 June 2019. The new legislation came into effect from 1 October 2019.

These changes are explained in more detail later in this guidance but, in summary, they may be categorised into three parts as follows:

(i) The reduced rate was removed for the installation of wind or water turbines.

(ii) The reduced rate remained fully available (except on the installation of wind and water turbines) on supplies of services of installing energy-saving materials in residential accommodation:

  • to a “qualifying person”, where the residential accommodation was the qualifying person’s sole or main residence (a “qualifying person” is defined in legislation as a person who is aged 60 or over, or is in receipt of certain benefits)
  • to a “relevant housing association” as defined in legislation, or
  • where the residential accommodation was a building or part of a building used solely for a “relevant residential purpose” as defined in legislation.

(iii) Otherwise, the reduced rate remained available (except on wind and water turbines) provided that the open market value of the supply of energy-saving materials did not exceed 60% of the cost (excluding VAT) of the total value of the supply of installing the energy-saving materials to the customer.  Where the value of the energy-saving materials exceeded 60%, only the labour cost element qualified for the reduced rate (with the supply of the materials being standard rated).